British
and Irish Legal Information Institute
Freely Available British and Irish Public Legal Information
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> URY ESTATE LIMITED AGAINST BP EXPLORATION OPERATING COMPANY LIMITED [2019] ScotCS CSOH_36 (18 April 2019)
URL: http://www.bailii.org/scot/cases/ScotCS/2019/2019_CSOH_36.html
Cite as: [2019] ScotCS CSOH_36
[New search] [Printable PDF version] [Help]
Page 1 ⇓
CA10/18
OUTER HOUSE, COURT OF SESSION
[2019] CSOH 36
OPINION OF LORD BANNATYNE
In the cause
URY ESTATE LIMITED
against
BP EXPLORATION OPERATING COMPANY LIMITED
Pursuer
Defender
Pursuer: Mr MacColl QC, Ms McKinlay advocate; Davidson Chalmers LLP
Defender: Mr Dunlop QC, Ms Watts advocate; Pinsent Mason LLP
18 April 2019
Introduction
[1] This matter came before me for proof before answer in the commercial court.
[2] In summary, the present case centres around this:
The pursuer seeks payment of compensation from the defender as a result of the
pursuer’s claimed inability to develop Ury House as a 35 bedroom five star
luxury hotel (“the proposed development”) due to the proximity to Ury House of
the BP Forties Pipeline (“the pipeline”).
Page 2 ⇓
2
The pursuer claims that it is entitled to such compensation as a result of the
provisions of a grant of servitude recorded in the General Register of Sasines for
the county of Kincardine on 26 August 1977 (“the servitude”).
[3] The dispute in the case in short related to:
Whether the defender is liable to pay compensation to the pursuer in terms of the
servitude?
If the answer to the first question is yes: what is the proper quantification of loss
which the pursuer has suffered?
Agreed background
(a) Title
[4] The pursuer is the heritable proprietor of certain lands known as and comprising
Ury Estate near Stonehaven (“the pursuer’s subjects”).
[5] The pursuer’s title to the pursuer’s subjects is registered in the Land Register of
Scotland under title number KNC11588, which title is produced in the joint bundle at 358.
[6] The defender was until 31 October 2017 the owner and operator of the pipeline.
[7] The pipeline passes through the pursuer’s subjects.
[8] By the servitude the then owner of the pursuer’s subjects (being a different company
then known as Ury Estate Limited) granted in favour of BP Oil Development Limited a
servitude right, tolerance and wayleave of laying down, maintaining, renewing and
protecting a line of steel pipe not exceeding 36 inches internal diameter in and through, inter
alia, the subjects comprising the mansion house of Ury and other parts of the lands and
estate of Ury for the purpose and use of conveying crude oil or petroleum or its products
Page 3 ⇓
3
from the BP terminal at Cruden Bay, Aberdeenshire to their refinery terminal at
Grangemouth.
[9] The presence of the pipeline within the pursuer’s subjects is regulated by the grant of
servitude.
[10] The servitude is recorded in paragraph 9 of the burden section of the said title sheet.
The servitude incorporates a schedule of conditions the terms of which are agreed between
parties.
[11] In the event that compensation is determined by the court in the present proceedings
to be payable to the pursuer under the servitude, it is accepted by both parties that the
compensation is due to be paid by the defender.
(b) The basis of claim
[12] The present claim is brought on the basis of condition 25 of the schedule of
conditions incorporated in the servitude. The condition read short, as relevant to the
circumstances averred by the pursuer, is as follows:
“(a) if at any time the [pursuer] wishes to develop land affected by the
pipeline…the [pursuer] shall if the said proposed development of the land is
prevented in whole or in part by reason only of the existence of the pipeline, give
written notice to [the defender] of the said proposed development including details
of the application for and refusal of or conditional grant of planning permission in
principle by the Planning Authority. Within six calendar months of the receipt of
such written notice [the defender] shall give their decision in writing to the [pursuer]
that they intend to divert the pipeline or that they intend to pay compensation for all
losses arising from their decision not to divert the pipeline, including, without
prejudice to the foregoing generality, losses of Development Value…”
(c) The development at Ury House
[13] A former mansion house (“Ury House”) is located within the pursuer’s subjects.
Page 4 ⇓
4
[14] Ury House is within the inner consultation zone applied by the Health and Safety
Executive (“HSE”).
[15] The pursuer obtained full planning permission for the conversion of Ury House into
a hotel.
[16] Planning permission and listed building consent for conversion of Ury House into a
hotel was obtained in 2012, 2014 and amended in 2015 (“the existing permissions”).
[17] The pursuer has obtained various planning permissions for housing development at
the wider Ury Estate.
[18] The pursuer has entered into agreements with Aberdeenshire Council (“AC”) under
section 75 of the Town and Country Planning (Scotland) Act 1997 (“the 1997 Act”) in relation
to the restoration of Ury House (see: JB document 240-242).
[19] The pursuer commenced work on sight for the development of Ury House in about
October 2014.
[20] In early 2017 the pursuer submitted an application for full planning permission
regarding Ury House in terms of planning reference APP/2017/0241 contained at JB
document 154-163 (“the refused application”).
[21] HSE’s PADHI system generated an “advise against” recommendation to the refused
application on the basis of the proximity of Ury House to the pipeline and their
recommendation is produced at JB documents 459 and 460. On 11 April 2017, AC refused
the pursuer’s application APP/2017/0241 for planning permission and their refusal is at JB
document 165.
[22] By letter dated 20 April 2017 the pursuer served a notice on the defender, namely: JB
document 328.
Page 5 ⇓
5
[23] The defender has failed to divert (or agree to divert) the pipeline within six months
of the notice of 20 April 2017.
The evidence
[24] The following witnesses gave evidence on behalf of the pursuer:
[25] Jonathon Milne, who is the controlling mind of the pursuer.
[26] Neil Mair, a senior planner with AC who had been heavily involved in the planning
applications process arising from the development of the pursuer’s subjects.
[27] Duncan Moir, managing director of McLeod and Aitken Limited, construction cost
consultants. Mr Moir is a quantity surveyor. He was involved in producing an elemental
cost plan in order to develop Ury House into a 35 bedroom luxury 5 star hotel.
[28] Dougal Morgan the managing director of the William Cowie Partnership of
architects. He is a qualified architect. He has done certain work in relation to the
development of the pursuer’s subjects.
[29] Norbert Lieder is the managing director of Inverlochy Castle Management
International (“ICMI”), which is a management and consultancy business for the hotel and
hospitality industries. He gave certain evidence regarding the viability of various hotel
projects on the pursuer’s subjects.
[30] Richard Slipper is a member of the Royal Town Planning Institute, he gave evidence
in relation to planning issues regarding Ury House and in particular the refused application.
[31] Mark Cleaver and Andrew Pratt are respectively a director and associate director of
Colliers International Property Consultants Limited and gave evidence regarding valuation
of the proposed development.
Page 6 ⇓
6
[32] Lastly the evidence of Stuart David Reston, HM Principal Specialist Inspector of
HSE’s chemical, explosives and microbiological hazards division and the evidence of Peter
Fraser, a director of Ramsey and Chalmers consulting structural and civil engineers as
contained in their witness statements and in the appendices thereto was agreed as their
evidence.
The witnesses on behalf of the defender
[33] John Handley, chartered town planner who gave evidence in respect of planning
issues.
[34] Andrew Clark-Hutchison gave evidence regarding the fundability of the proposed
development.
[35] Stuart Robinson, chartered quantity surveyor, gave detailed evidence regarding the
costings for the proposed development.
[36] Dexter Moren, an architect who gave evidence regarding the buildability and
viability of the proposed development.
[37] Mike Rothwell, who gave evidence regarding the buildability and viability of the
proposed development.
[38] Robert Chess, who gave evidence regarding the valuation of the proposed
development.
[39] As in all commercial cases detailed witness statements had been lodged on behalf of
the various witnesses or detailed reports and these stood as their evidence in chief in the
case.
Page 7 ⇓
7
Submissions for the pursuer
[40] Mr MacColl commenced his submissions by addressing the issue of assessment of
the various witnesses.
[41] His broad position was that the pursuer’s witnesses had given their evidence in a
straightforward manner and that their evidence had been fully vouched.
[42] In respect to the evidence of Mr Moir and Mr Morgan he reminded the court of their
direct involvement and lengthy experience with the developments at the pursuer’s subjects
and submitted that this gave them a particular advantage when giving evidence over the
various witnesses for the defender who did not have such involvement.
[43] He made detailed submissions regarding two further witnesses for the pursuer: first
Norbert Lieder, he submitted that Mr Lieder was both credible and reliable. He accepted
that his oral evidence had been short in compass, however, that did not, in any manner, cut
across the evidence given in his witness statements, nor indeed, was he challenged on the
validity of the views expressed within those statements. The suggestion, advanced by the
defender, that his oral evidence required the court to disregard the material in his witness
statements he submitted was wholly unjustified. This was particularly the case given that
the defender actively chose not to challenge the material contained in Mr Lieder’s witness
statements in any way.
[44] Secondly, he made certain observations in respect to the evidence of Mark Cleaver: it
was his position that this witness provided robust and compelling expert testimony as to the
basis of valuation which had been offered up by Colliers. He emphasised that Mr Cleaver
was highly experienced, with more than 30 years in the hotel industry. He gave a clear
explanation why in the circumstances it was appropriate to proceed on the basis of the
assumptions disclosed in the said valuation. He was not challenged on the plain material
Page 8 ⇓
8
contained in the Colliers reports, particularly the second report, setting out Colliers’ detailed
views as to why a luxury hotel with 35 bedrooms could be regarded as developable at Ury
House and further, was the proper basis for the valuation exercise which had been
undertaken. He submitted that it was too late to claim that his opinions were mere ipse dixit,
as the defender now sought to do, when this suggestion had not even been put to the
witness. He submitted that Colliers had fully complied with the obligations incumbent
upon them under and in terms of the red book.
[45] In respect to the witnesses for the defender he reminded the court that each of the
witnesses had been led as an expert.
[46] It was his position that each, although to various extents, had engaged issues
particular he drew the court’s attention to the following guidance given by the Supreme
Court in Kennedy:
(a) An expert witness requires to be independent and impartial and provide
independent assistance to the court by way of objective unbiased opinion. An
expert may not act as an advocate for a particular party’s cause (see: Kennedy at
paragraphs 51 and 52).
(b) If there are matters of which the expert is aware which are not supportive of his
view or the position being advanced through the expert on behalf of his or her
client, these require to be disclosed to the court and, indeed, the other party to the
litigation (see: Kennedy at paragraph 52).
(c) A failure to meet the foregoing requirements of expert evidence renders material
offered up as “expert evidence” inadmissible. It is more than a question of
weight of evidence (see: Kennedy at paragraph 51).
Page 9 ⇓
9
(d) It is not good enough for an expert witness to rely upon their own ipse dixit to
justify the views that he or she advances in relation to a matter upon which
expert evidence is being led. An unsubstantiated ipse dixit is “worthless” (see:
Kennedy at paragraph 48).
Against that background he then turned to look at each of the defender’s witnesses in turn:
[47] In respect first to Mr Handley, he submitted that having regard to the observations in
Kennedy his evidence was wholly inadmissible and fell to be disregarded. In development of
this position he said this: as became clear during the course of his evidence, Mr Handley, far
from being independent and impartial, was someone who had been a direct actor in the
factual issues that were live before the court. He himself had made representations to the
planning authority on behalf of the defender during the course of the planning process in
respect to the refused application. He had also, during the course of that process, already
reached clear and developed views on the merits of the refused application which he
subsequently purported to offer as “expert evidence” in the present case. Accordingly his
evidence fell to be excluded from consideration.
[48] In respect to Mr Clark-Hutchison, it was his position that his evidence required to be
treated with care. He acknowledged that the conclusions that he offered up were wholly
dependent upon the valuation and costing evidence offered by the defender’s other
witnesses. More importantly, however, he informed the court that he had prepared a
supplementary report which advanced the position on the availability of funding which was
significantly more favourable to the position of the pursuer. The supplementary report had
not, however, been made available. As such it would appear that Mr Clark-Hutchison had
not discharged the functions owed by an expert witness to the court, particularly as regards
to giving a full and impartial picture.
Page 10 ⇓
10
[49] Turning to Mr Stuart Robinson, his general position was that this witness was not a
compelling witness. Again, he submitted that this witness had not offered a full or impartial
analysis of the matters upon which he was meant to give evidence. He went further, and
said this; the witness did not appear to have applied himself in any particularly detailed
manner to the validity or otherwise of the cost he gave for the potential development of Ury
House. He disclosed, when tested in cross-examination, that he had applied throughout this
process numbers which he knew were inaccurate, for example rejecting real world figures
for speculative and higher figures, or figures which he had not tested in any rational manner
as to their fairness. His overall approach led to a repeated and significant inflation of the
costs which he had applied. Moreover, the want of objectivity in Mr Robinson’s approach
was such as to take him outwith the scope of a person acting as a true expert witness and
into the position of someone merely advocating for increased and inflated costs. His
evidence, therefore, should not be regarded as admissible. In any event, it should certainly
be rejected where it ran contrary to that of Mr Moir.
[50] Mr Dexter Moren was also heavily criticised by Mr MacColl. He first said that there
was no material before the court to justify the defender’s assertion that he was an architect of
world renown and secondly, he did not appear to have any particular experience of the
Scottish market. However, most importantly what was notable in his evidence was that
views which he was proffering were entirely based on what might be described as his own
personal say so. What he did not do in support of these views was provide any objective
supportive evidence. He described this witness as being dogmatic in his approach and that
he had sought to advance justifications for his positions that bore to be brought forward “on
the hoof”. As such it was his position that Mr Moren’s evidence amounted to more than his
ipse dixit and in terms of Kennedy should for that reason, if for no other, be entirely rejected.
Page 11 ⇓
11
Lastly, it was his position that this witness was not entirely reliable in that he appeared to
have forgotten details of the background to the preparation of his report including the
nature of material which had been provided to him for the purposes of the preparation
thereof.
[51] Moving on to Mr Rothwell again it was Mr MacColl’s position that his evidence
should be treated with some caution. It was his position that his evidence was in large part
ipse dixit. Insofar as it was sought to vouch it independently, when that independent
vouching was examined his position was not consistent therewith. He accepted that many
of the issues upon which he offered up a view were, in truth, issues for architects. Lastly he
did, however, also accept that issues of layout were capable of satisfactory resolution.
[52] Lastly there was the evidence of Mr Chess, his position regarding this witness’s
evidence was this: he accepted that this witness was an expert and in addition that he bore,
during the course of giving evidence, to be doing his best to assist the court however, the
following points he submitted fell to be noted in his evidence:
(a) His valuation, as advanced in his report, was wrong. The reason for this error
was not wholly clear. In this regard, he also submitted that at least some
significant part of the work underlying the CBRE report was carried out by
Mr Mitchell, who was not available as a witness.
(b) The task to which he addressed himself was a different task from that addressed
by the pursuer’s valuers, with Mr Chess valuing a 3/4 star hotel. He took no
particular issue with the approach or conclusions reached by Colliers on the
hypothesis on which they were working. There was also a material disconnect
between the approach of Mr Chess and that of Mr Robinson, on whose material
he bore to found, Mr Robinson bore to allow costs for the most luxurious
Page 12 ⇓
12
development imaginable, while Mr Chess rejected the view that such a
development would take place.
(c) Lastly in cross-examination, Mr Robinson accepted that in reaching the values
that he had provided he had omitted a relevant factor, being monies available
further to the section 75 agreement, of which he was aware at the time of writing
his report. He did not provide any clear reason or justification as to why this had
not been disclosed in his report.
[53] On the basis of the foregoing analysis of the defender’s position in evidence it was
Mr MacColl’s argument that I should prefer the evidence of the witnesses for the pursuer to
that given on behalf of the defender in respect to all disputed matters.
[54] Having made the foregoing submissions Mr MacColl then sought to develop his
argument as follows: the pursuer wishes to develop Ury House and parts of the
surrounding lands comprised in the pursuer’s subjects as a five star, luxury hotel and golf
course. Jack Nicklaus has designed a golf course for the Ury Estate. It is reasonably
anticipated that this will be a very significant attraction for guests to a hotel. It is also
intended that there will be spa facilities included in the hotel (at its lower ground floor).
In support of the foregoing submission Mr MacColl relied on the following evidence:
Jonathon Milne Statement [20]; Neil Mair Statement [9]; Jonathon Milne
Supplementary Statement [6]; Jonathon Milne Statement [24] and [31]; Jonathon
Milne oral evidence (cross); and Norbert Lieder Statement [6] and [11]; Norbert
Lieder Supplementary Statement [7]
Had the necessary planning permission been capable of being obtained, the development of
a thirty five bedroom luxury five star hotel at Ury House was readily buildable and
achievable, from both a commercial and practical perspective. Thirty five bedrooms could
have been accommodated within the two upper floors of Ury House. There was no need for
these bedrooms to have a minimum 30 metre square floor area for the hotel to be luxury or
Page 13 ⇓
13
five star (as contended for by the defender) – this was, albeit reluctantly, accepted even by
Mr Moren. There is no such minimum area for bedrooms in a luxury or five star hotel. The
only objective evidence (being the AA particulars) does not specify any requisite room size.
Similarly, the other required facilities (both front and back of house) could have been
accommodated within Ury House. As the defender’s own witnesses (notably Mr Moren and
Mr Rothwell) accepted, any issues with drawings which were before the Court were of a
nature which could be readily cured. These are the sort of issues that are frequently
encountered and resolved during the course of a development of this nature (at building
warrant stage and by way of non-material variation of planning). There would have been
no difficulty obtaining listed building consent for such a development.
In support of the foregoing submission Mr MacColl relied on the following: Jonathon
Milne Statement [37]; Peter Fraser Statement [6] to [16]; Duncan Moir Statement [11]
to [15]; Dougal Morgan oral evidence (particularly in relation to his drawing –
document 99 in the joint bundle at p461), and his statement [6], [9] to [10] and [27] to
[48], and Supplementary Statement [3] to [5] and [10] to [14]; Norbert Lieder’s
Statement [11] and [17]; Colliers Supplementary Report at [2.3] to [2.4], (the content
of which was not challenged during the course of cross-examination); Mark
Cleaver’s oral evidence (cross); Robert Chess oral evidence (cross); Peter Fraser’s
Statement [13][15]; Dougal Morgan Statement [48] and oral evidence; Dougal
Morgan’s Statement [10]; Norbert Lieder Supplementary Statement [6]; Mr Moren
and Mr Rothwell in cross; Dougal Morgan’s Statement [11] and oral evidence;
Dougal Morgan’s drawing (Witness bundle, p461); Dougal Morgan Statement [11]
and Supplementary Statement [3] to [14]
Moving on Mr MacColl submitted that development works have already taken place within
Ury House in order to progress its development into a hotel (albeit with fewer bedrooms
than the pursuer would wish to develop within it). Prior to these works Ury House was a
ruin (with no roof and no interior fit out). New floors, walls, stairs, roofs and windows have
all required to be installed.
In support of the foregoing submission Mr MacColl relied on the following:
Jonathon Milne Statement [16] [17] [21] [28-30] [32]35]; Jonathon Milne
Supplementary Statement [1-7] [17-18] [22-24]; Peter Fraser Statement [6-16]
Page 14 ⇓
14
(unchallenged); Duncan Moir Statement [11-15]; Dougal Morgan Statement [6] [9-
10] [27-48]; Dougal Morgan Supplementary Statement [3-5] [10-14]
Turning to the planning position in respect to Ury House Mr MacColl said this: the pursuer
has obtained outline planning permission for the conversion of Ury House into a hotel. The
planning permission held by the pursuer permits development of Ury House into a
5 bedroom hotel (only). The fact that this planning permission is restricted to 5 bedrooms
only is made plain by the express incorporation into the grant of planning permission of
plans showing 5 bedrooms. Reading the existing planning permission as permitting
development of more than 5 bedrooms requires (as Mr Handley accepted in
cross-examination) the express incorporation of plans to be ignored, which is not (and
cannot be) an appropriate way in which to construe the planning permission. Further, there
has been no established hotel use that might otherwise be argued to support an increase in
the number of bedrooms without additional planning permission. The subsequent (2017)
application for planning permission for a 35 bedroom hotel was addressed by the planning
authority on the basis that the existing planning permission extended to a hotel with only
five bedrooms. Contrary to the position advanced by the defender, and in the face of an
express refusal of an application for planning permission for 35 bedrooms, no prudent
developer would have proceeded on the basis that the existing planning permission (for a
five bedroom hotel) would also be sufficient to enable development of Ury House as a
35 bedroom hotel.
In support of the foregoing submission Mr MacColl relied on the following:
Jonathon Milne Statement [24]; Neil Mair Statement [8] and Supplementary
Statement [4] to [6]; Richard Slipper, Supplementary Report [1.11] to [1.17];
Planning decision APP/2014/1714, Joint Bundle 72 (p535); WCP Approved Plan
2296/1703 Joint Bundle 56 (p379); Planning Decision APP/2015/2710 Joint Bundle 132
(p883); WCP Approved Indicative Floor Plan 2296/2004 Joint Bundle 114 (p841);
Report of Handling APP/2017/0241 Joint Bundle 166 (p1081); and Jonathon Milne
Supplementary Statement [10] to [12]
Page 15 ⇓
15
It was his position that on the basis of the whole evidence a luxury 35 bedroom hotel (with
related Jack Nicklaus designed golf course) that could (and would) have been built at Ury
House had planning permission been obtained therefor would have had a capital value of
£12,400,000. The hotel is an integral part of the wider development of the Ury Estate. Its
facilities tie in with the development of the golf course. The pursuer had already begun the
development of Ury House so as to facilitate the placement there of a luxury hotel. A luxury
5 bedroom hotel at Ury House (with related Jack Nicklaus designed golf course) which
could be built in terms of the existing planning permission would have a value of only
£800,000. This differential valuation is consistent with the pursuer’s position that it would
have developed the thirty five bedroom hotel (to a luxury five star standard) had planning
permission been available for that development.
In support of the foregoing submission Mr MacColl relied on the following: the
whole terms of the Colliers Report; Jonathon Milne Statement [20]; [29] to [31]; and
Jonathon Milne Statement [25]
The difference in cost between developing a luxury 35 bedroom hotel and a luxury
5 bedroom hotel within Ury House would be an additional £716,810. This differential would
remain the case even were the costs attributable to the development of Ury House as a hotel
to go up or down from those calculated by Mr Moir.
In support of the foregoing submission Mr MacColl relied on the following:
Schedule of Mr Moir (witness bundle, p369)and the Oral evidence of Mr Moir
Turning to the question of the total costs of redevelopment of Ury House into a five star,
luxury 35 bedroom hotel (including spa) he submitted that these were reasonably estimated
at a maximum figure of £11,213,574. This figure is comprised of:
(a) £2,721,330 (costs already incurred in works actually carried out);
Page 16 ⇓
16
(b) £5,462,565 towards the cost of further build out costs (as provided for in the
schedule of Mr Moir and spoken to him in evidence) – this includes elements
towards spa facilities (by way of plunge pools) already allowed for by
Mr Moir;
(c) £808,884 towards the cost of external works (including drainage and access
works) (as also provided for in the schedule of Mr Moir and spoken to him in
evidence);
(d) a generous £1,000,000 towards additional costs from the installation of a pool
and spa in the lower grounds floor (as spoken to by Mr Moir);
(e) a generous £898,220, in respect of FFE (being half of the costs allowed for in
Mr Robinson’s excessive and unjustified FFE schedule); and
(f) a further £322,575 of additional costs (including a very generous £200,000
towards garden renovation costs, much of which is already allowed for by
Mr Moir).
For completeness, any assertion by the defender that Mr Moir acceded to a suggestion that
the true costs of redevelopment was at least £12.3 million is incorrect on the evidence before
the Court.
In support of the foregoing submission Mr MacColl relied generally on the
following: Schedule of Mr Moir (witness bundle, p369); so far as the figure for
additional costs at (f) this was made up as follows: £200,000 in respect of garden
works; £18,000 in respect of lighting; £4,600 in respect of partitions; £3,000 in
respect of IT cooling units; £3,000 in respect of bar store cooling; and £6,000 in
respect of dry risers; together with £35,190 (by way of prelims at 15%), professional
fees of £29,325 (at 12.5%), and risk and contingency of £23,460 (at a generous 10%).
Accordingly on the foregoing basis, there would be a 35 bedroom hotel which would be
worth £12,400,000 and would cost (at most) £11,213,574 to build (of which at least
£7.6 million was available by way of enabling development funding and had to be used for
Page 17 ⇓
17
the purpose of renovation of Ury House. There would, even on the analysis of Mr Clark-
Hutchison (and on any of his lending covenants), be no difficulty in securing commercial
funding for the development, given that the level of funding required would be only
£3,613,574. Indeed, the pursuer notes that Mr Clark-Hutchison (in cross-examination) stated
that the prospects for lending were much more positive (on the Colliers valuation) than
those set out in his report. In any event, the pursuer also notes that the unchallenged
evidence of Mr Milne was that additional monies (beyond the ring fenced section 75
funding) were being generated by way of house sales and that a funding difficulty for the
proposed development would only emerge were costs to reach £14,000,000. Thus, the
pursuer could and would have developed Ury House as a thirty five bedroom luxury five
star hotel but for the fact that planning permission for that development could not be
obtained as a result of the location of the pipeline. Thus it was his position that there would
be no difficulty in developing a 35 bedroom 5 star luxury hotel in Ury House. There was no
practical difficulty in funding the proposed development.
In support of the foregoing submission Mr MacColl relied on the following: Colliers
Report together with the oral evidence of Mr Cleaver and Mr Pratt in cross
examination. He argued that when considering these issues it was noteworthy that
Mr Chess (of CBRE) did not challenge the validity of the valuation offered up by
Colliers on the hypothesis that they have advanced it. Rather, the position of
Mr Chess, on the basis of information provided to him by others – is to argue that the
quality of the offer which the pursuer maintains would have been available at its
thirty five bedroom hotel would not be sufficient to generate the income which
underlies the Colliers’ valuation. This approach does not disturb or undermine the
validity of the Colliers’ valuation. Moreover, nothing advanced by the defender in
cross-examination caused the Colliers’ witnesses to depart from their valuation. The
court is invited to note, in particular, the robust nature of the evidence of Mr Cleaver,
a highly experienced hotel operator, with more than thirty years of experience in the
market. Jonathon Milne, oral evidence (cross)
Mr MacColl emphasised that the pursuer has ready (and necessarily) ring-fenced funding
which must be used for the development of Ury House into a luxury hotel. The housing
Page 18 ⇓
18
developments within the pursuer’s subjects will provide a source of funding for the
development of Ury House into a hotel. Indeed, the pursuer is required to use monies
generated from those separate housing developments for the restoration of Ury House
(which does not, for the avoidance of doubt, include the walled garden). Planning
permission has been granted for 230 housing units in the housing developments within the
pursuer’s subjects. Agreements with Aberdeenshire Council granted in terms of section 75
the 1997 Act provide inter alia that a sum equal to the sum of £33,083 (Index Linked) from
the disposal of each housing unit are to be placed in a joint deposit account with the Council
and used for the restoration of Ury House. This will generate a total sum of £7,609,090. The
housing is (and will continue to be) sold.
In support of the foregoing submission Mr MacColl relied on the following:
Jonathon Milne Statement [21]; Joint Bundle document 241 (p1431); Jonathon Milne
Statement [28]
A separate section 75 agreement is in place to provide funding by way of enabling
development for the Jack Nicklaus golf course. The golf course has already been laid out on
the ground. This was the unchallenged oral evidence of Mr Milne.
[55] So far as the genuineness of the pursuer’s plans to carry out the proposed
development it commenced work on site for the development of Ury House in about
October 2014. The pursuer has already spent at least £2,721,330.24 on the development,
having carried out significant works to install new floors, walls, stairs, roofs and windows.
This is plainly indicative of there being a real and achievable intention on the part of the
pursuer to redevelop Ury House (and to do so as a hotel). This is also consistent with the
fact that the golf course (for which there is separate funding) has already been laid out.
[56] Against that general background, as at 2017, the pursuer wished to develop Ury
House into a luxury 35 bedroom hotel. Such a development could readily have been
Page 19 ⇓
19
achieved within Ury House, but for the presence of the pipeline on the basis of the evidence
referred to. A 35 bedroom hotel within Ury House makes significantly more commercial
sense than its use as a hotel with only 5 bedrooms (which is the alternative development that
will be taken forward, in concert with additional bedrooms in the walled garden). A 35
bedroom hotel within Ury House would also have significantly greater capital value than a 5
bedroom hotel there. In early 2017, the pursuer sought full planning permission to develop
Ury House into a 35 bedroom hotel. The pursuer’s application had reference
APP/2017/0241.
[57] The HSE objected to the application on the basis of the proximity of Ury House to the
pipeline. The application and HSE’s position were not disputed.
[58] On 11 April 2017, Aberdeenshire Council refused the pursuer’s application for
planning permission. The application was refused only on the basis of the proximity of Ury
House to the pipeline. This was made clear by the letter refusing planning permission from
Aberdeenshire Council to the pursuer’s agents dated 11 April 2017. The proximity of the
pipeline was the only reason for refusal of the planning permission to develop a 35 bedroom
hotel at Ury House.
[59] By letter dated 20 April 2017, the pursuer (through its solicitors) served notice on the
defender seeking diversion of the pipeline, which failing payment of compensation in
respect of losses arising from the presence of the pipeline. This letter was a valid and
effective notification of a claim by the pursuer to the defender under and in terms of
Condition 25 of the Schedule of Conditions.
[60] The defender has failed to divert (or agree to divert) the pipeline within six months
of the notice of 20 April 2017. Neither of these matters were contentious.
Page 20 ⇓
20
[61] He submitted that having regard to the foregoing the pursuer is now entitled to
payment of compensation by the defender in accordance with Condition 25.
[62] Mr MacColl then turned to address the issue of the proper measure of loss and to the
issue of quantification of loss in terms thereof and said this: the pursuer reasonably
estimates that it will incur losses of at least £10,883,190 as a result of the ongoing presence of
the pipeline (and the refusal to divert it away from Ury House). This is the difference in
value between the luxury 35 bedroom hotel (with related Jack Nicklaus designed golf
course) that could have been built at Ury House had planning permission been obtained
therefor (being £12,400,00) and a luxury 5 bedroom hotel at Ury House (with related Jack
Nicklaus designed golf course) for which the pursuer presently has planning permission
(being £800,000), less the further sum of £716,810, which it is reasonably estimated would be
the additional build cost for a thirty five bedroom hotel at Ury House over a five bedroom
hotel there. This is the proper measure of the loss for which the pursuer falls to be
compensated under the Servitude.
[63] Lastly before turning to his legal submissions Mr MacColl turned to the issue of the
walled garden planning permission which had been obtained by the pursuer. He accepted
that the pursuer has obtained conditional permission for the development of hotel rooms
(but not a full hotel) at an old walled garden within the Ury Estate. This potential
development is a separate and supplementary development to the proposed hotel
development of Ury House. It is, critically he submitted, not a substitute for the thirty five
bedroom development at Ury House which is precluded by the pipeline. In expansion of
that proposition he argued it does not impact in any negative manner upon the viability of
the proposed thirty five bedroom development at Ury House. Moreover, the availability of
planning for the walled garden development is not is any way dependent or conditional
Page 21 ⇓
21
upon the pursuer not having planning for the larger (35 bedroom) hotel at Ury House itself.
There is no suggestion before the Court (and it was not put to Mr Mair, the planning officer)
that Aberdeenshire Council would regard 35 bedrooms as being the maximum development
for a hotel that they would permit within the Ury Estate.
[64] On the basis of his discussion of the evidence Mr MacColl made the following legal
submissions.
[65] In order to entitle the pursuer to compensation in terms of the provisions of
condition 25 it was his position that the pursuer had to demonstrate three things:
That the pursuer wished to develop land affected by the pipeline;
That the proposed development has been prevented in whole or in part by reason
only of the existence of the pipeline; and
That the defender has refused to divert the pipeline to enable the development to
take place.
[66] The pursuer on satisfying these tests then is entitled to: “compensation for all losses
arising from [the defender’s] decision not to divert the pipeline”. He emphasised that the
test for compensation was not the difference in value of the pursuer’s land with and without
the planning permission for the 35 bedroom hotel, as the defender appeared to suggest.
[67] He submitted that for the reasons which he had detailed earlier in his submissions
each of the foregoing tests was met.
[68] He submitted that the points developed by the defender in rebuttal of the pursuer’s
position were without merit.
[69] He argued first that the pursuer had a clear and genuine wish to develop a
35 bedroom luxury five star hotel at Ury House. In support of this he argued that such a
development wold have been by far the most commercially sensible way in which to make
Page 22 ⇓
22
use of Ury House, given its position at the centre of the wider development of the pursuer’s
subjects. Moreover, it was a desire which was wholly consistent with the extensive planning
history of the sight, with the pursuer regularly and repeatedly taking steps to utilise Ury
House as a luxury five star hotel. The fact that Mr Milne accepted that he was aware that the
application for planning for a 35 bedroom hotel would have been likely to fail did not mean
that there was any want of desire to carry out the development. The evidence he submitted
plainly pointed to the development taking place but for the existence of the pipeline.
Similarly, the “quality” of the plans accompanying the 2017 application and the volume of
other supporting documentation was neither here nor there. There was as a matter of fact, a
genuine application made to obtain planning for a 35 bedroom hotel. This application was
refused for a single reason, namely: the location of the pipeline close to Ury House.
[70] Secondly, he turned to the issue of viability raised on behalf of the defender, and
submitted that the development of a 35 bedroom five star luxury hotel at Ury House was
clearly viable on the evidence before the court. The necessary rooms and facilities could be
accommodated within Ury House. There was no undermining of Mr Morgan’s clear
evidence on this point, supported by the views expressed by Colliers’ witnesses within their
supplementary report. The defender’s witnesses accepted that any issues that they
identified in drawings could be resolved as a matter of layout. There was nothing unusual
for such changes to be made as matters proceeded through the building warrant stage.
Overall it was his position that the defender had failed to identify and establish that there
were any true impediments, in respect to the issues of funding, buildability and viability, to
the development of the 35 bedroom luxury hotel beyond those caused by the presence of the
pipeline. The criticisms based on these three issues were without merit.
Page 23 ⇓
23
[71] Moving from the substance of the claim for compensation to the method of
assessment of that claim his general position was that again there was no merit in the
defender’s arguments.
[72] He submitted that the pursuer had for the following reasons adopted the correct
approach to the issue of quantification: the pursuer’s position on loss is straightforward.
Given the funding available as a result of the section 75 agreement, the issue of funding and
costing of the development of the subjects is of only limited relevance. The correct
approach, it is submitted (and acknowledging that the Court will properly take a broad axe
to all questions of loss – cf Duke of Portland v Wood’s Trustees 1926 SC 640), is to compare the
difference in value between a 35 bedroom hotel (with related Jack Nicklaus designed golf
course) at Ury House which cannot be developed with the 5 bedroom hotel at Ury House
(with related golf course) for which planning permission exists, allowing also a further
discount for the additional build costs of a 35 bedroom hotel at Ury House beyond those of
the 5 bedroom hotel. On the evidence before the court, this gives rise to a loss of £10,883,190.
[73] In further development of this position he went on to say this regarding the
approach to the assessment of compensation adopted by the pursuer: it compares the
position that would have been had there been “no pipeline” with that in which the pursuer
finds itself in the present circumstances, given the existence of the pipeline. The words of
the servitude do not restrict recoverable losses to mere losses of development value, as the
defender attempts to assert. Nor is there any basis, in fact or law, to adopt the approach
urged by the defender, founding, again, on a case which turns on wholly different facts,
should be restricted to hope value alone. In this case, as is opposed to Spirerose, there is no
basis for arguing that planning permission for a 35 bedroom luxury hotel would not have
Page 24 ⇓
24
been obtained but for the presence of the pipeline. That position is clearly established on the
wording of the 2017 planning refusal itself.
[74] Mr MacColl also advanced a fall-back position, should the court believe that there
was any merit in the defender’s attack on the pursuer’s primary approach to quantification
of loss. He submitted that in those circumstances the court would nevertheless require to
consider the loss of a chance to develop a 35 bedroom luxury hotel as against a five bedroom
luxury hotel.
[75] Such a loss he submitted would be compensatable. He relied on the following cases:
Kyle v P and J Stormonth Darling [1992] SLT 264 and Barker v Corus (UK) Limited [2006] 2 AC
572.
[76] In order to be compensated in terms of this approach, the court must be satisfied that
the chance which has been lost is a real and substantial one. However, this does not mean
that it requires to be shown on a balance of probabilities that it would have come to fruition.
Even a limited chance of a very significant financial outcome would be more than negligible
and would give rise to recoverable loss. In support of this position he directed my attention
MacGregor, Damages (20th Edition), paragraph 10-051.
[77] In calculating a loss based on the foregoing approach a Scottish court should simply
adopt a “broad axe” approach to the quantification of any loss (see: Duke of Portland). In the
present circumstances given the strong prospects of the development being progressed,
were there to have been no pipeline, the damages quantified on such a basis would be a very
high proportion, and he submitted that such a high proportion would be 80% of the losses
based on the pursuer’s principal approach to quantification as above advanced.
Page 25 ⇓
25
[78] Moving on, Mr MacColl examined the defender’s contention that benefits had
accrued to the pursuer as a result of the existence of the pipeline and these benefits required
to be set off against any proven losses arising from the existence of the pipeline. Mr MacColl
disputed, on the basis of the wording of the relevant condition, that account had to be taken
of any such benefit.
[79] Beyond that, he argued there was no evidence that any such benefits had in fact
accrued to the pursuer. In particular he submitted that there was no evidence that the
enabling development, the planning permission for the golf course and the planning
permission in respect to the walled garden were obtained because of the existence of the
pipeline, the refusal of the relevant planning permission and the failure to move the
pipeline.
[80] Lastly he submitted that there was no evidence supporting the defender’s assertion
that the refused permission would have been refused anyway, namely: even if there had
been no pipeline. It was his position that there was no support for this position in the
evidence.
The defender’s response
[81] Mr Dunlop commenced his submissions by looking at the evidence of the various
witnesses. Broadly it was his position that the evidence of the various witnesses for the
pursuer could be accepted as credible. However, it was his position that certain issues arose
relative to the reliability of certain of these witnesses.
[82] So far as specific remarks regarding the pursuer’s witnesses he said this:
Mr Milne was plainly doing his best to bolster the claim made by his company.
He submitted that concerns arose given his failure to produce various
Page 26 ⇓
26
documents, and his evidence at the commission that such documents did not
exist, only for those documents then to be forthcoming from other parties, in
particular, ICMI. However, he accepted that little perhaps turned on the
evidence of Mr Milne, other than the question of the genuineness of the refused
application. It was Mr Dunlop’s position that having regard to the evidence of
Mr Milne, he had accepted that the application was not a real attempt to obtain
planning permission.
Mr Mair’s evidence could be accepted.
In respect to Mr Slipper it was his position that he had said little to disagree with
Mr Handley. Insofar as there was any disagreement, Mr Handley it was
submitted was the more impressive expert.
Turning to Mr Lieder’s evidence it was his position that this could be discounted
in its entirety, standing his candid acceptance that he had not been asked to
appraise, and thus could not offer evidence on, the 35 bedroom proposal to
develop Ury House.
Turning to Mr Moir’s evidence he described it as being useful so far as it went.
However, there were two clear difficulties with it: he did not produce costings
for everything necessary to get the pursuer to where it needed to be, namely:
with a fully built and successfully operating five star luxury hotel; and insofar as
he quarrelled with the defender’s costings his evidence rather detracted from the
idea that what would be built would be able to trade as such a hotel.
Lastly, in respect to the report prepared by Colliers he submitted that it had a
fundamental flaw, namely: its use of special assumptions. This was an issue
which he intended to further develop later in his submissions.
Page 27 ⇓
27
He described Messrs Cleaver and Pratt as credible witnesses, but the reliability of
their evidence could not be accepted uncritically given their failure to address
basics such as the professional requirements incumbent on a surveyor giving
expert evidence to the court; their failure to interrogate the use of special
assumptions; and the disconnect between what they were valuing and that in
respect of which planning permission had been refused.
[83] Turning to the defender’s witnesses he made the following observations: they
should be accepted as credible and reliable. There were challenges to the independence of
Mr Handley and Mr Robinson, however, these should be rejected. His position in response
to these challenges was that both witnesses were clearly doing their best to assist, and were
nonplussed by the suggestion that they were “guns for hire”. Mr Robinson, who faced the
sternest of the challenges, he submitted could clearly be seen to have taken an objective
stance, in his assessment of the pursuer’s quantity surveyor’s figures, in particular this was
shown by his identifying over £370,000 in terms of costs which had been included by
McLeod and Aitken but which should not have been. That is not the action of someone
doing his best, as was submitted by Mr MacColl, to inflate the cost of the project.
[84] So far as the rest of the defender’s witnesses were concerned there was he submitted
no real challenge to the credibility or reliability of these. It was his position that each of
them could be regarded as an expert in his respective field.
[85] Moving to his detailed submissions in respect of the various issues in the case
Mr Dunlop first said this: the first and primary requirement in terms of condition 25 is that
the pursuer genuinely wishes to develop the land, in the way specified in the proposed
development. It was his broad position that this had not been proved.
Page 28 ⇓
28
[86] In development of the above he submitted that it is quite clear that the 2017 planning
application was designed to fail. In the pleadings it was admitted that there had been a
previous claim for compensation, which was abandoned in light of the pursuer’s failure to
show that planning permission had actually been refused as a result of the existence of the
pipeline. The 2017 application was submitted in order to fill that lacuna. Thus the
2017 application was not a serious one, and was designed to fail. This can be seen from the
following considerations:
Mr Milne practically accepted that it was not a serious attempt to obtain planning
permission.
None of the documents that one might expect to be submitted with a serious
attempt to obtain planning permission were in fact submitted.
Before one might envisage incurring the costs of developing a 35 bedroom hotel,
one would need to be confident of its viability. Here, the project is not viable.
But before one even begins to explore whether or not the project would be viable,
one would need to know that there was a genuine desire to develop. Absent
such a desire, the compensation provisions are not triggered. The absence of any
assessment of viability by the pursuers, in advance of the 2017 application, is
redolent of an attempt to manufacture a claim for compensation under the
servitude.
The plans attached to the 2017 application were on any view produced in a most
unusual and unsatisfactory way: rather than coming from the retained architects,
as might have been expected, the plans were cobbled together by someone
in-house at the pursuer, without any thought as to whether the resulting picture
was buildable. It was clear from the evidence that it was not: basics such as the
Page 29 ⇓
29
marrying up of staircases had not taken place. Moreover, the plans were “passed
off” as those of Mr Morgan, standing the use of his firm stamp, despite the fact
that this was incorrect.
AC’s suggestion to Mr Milne that the existing consent would allow the formation
of additional bedrooms was not pursued (JB page 1208).
[87] Secondly it is a requirement that the proposed development be “prevented [by] the
existence of the pipeline”. Whilst it is admitted that the refused application was refused as a
result of the existence of the pipeline, there was already an existing planning permission,
from 2014 and 2015 (the existing permissions), to convert Ury House into a hotel, with no
condition limiting that permission regarding the number of bedrooms. The only limitation
on room numbers is found in the space available within the building and not in the 2017
refusal itself.
[88] Mr Dunlop in development of this argument submitted: that nothing could be done
by AC to stop the creation of a 35 bedroom hotel, that is clear from the evidence of Mr Mair,
and the contemporaneous email traffic, in particular joint bundle at pages 1208 and 1371.
Moreover, he submitted that it was relevant to consider what happened in 2018. As can be
seen from appendix L to Mr Reston’s statement (witness bundle at page 715 to 717), the
pursuer submitted an application for full planning permission (“the 2018 application”)
which went far beyond permission already obtained in 2015. For example, there was to be
development across all floors, involving use of the building by potentially hundreds of
people. HSE’s “advise against” recommendation in relation to the 2018 proposed planning
application was side stepped by the planning authority, which was plainly keen to assist the
pursuer, on realisation that the 2018 proposal involved only internal changes to the building
and did not require planning permission at all. There was no suggestion of the need for the
Page 30 ⇓
30
hotel to be trading. Mr Dunlop directed the court’s attention to the fact that there had been
no explanation in the evidence of why the position was any different regarding internal
changes to increase the number of rooms. The highest the evidence got on this aspect of the
case, from the viewpoint of the pursuer, was the indication from Mr Mair that hotel use
would need to be implemented first before changes in the number of rooms could be made
without further planning permission. However, as was explained by Mr Handley and as in
any event is clear as a matter of law (see 1997 Act, section 27(1)) implementation, in this
context, simply means commencement of operations, and on no view has that not happened.
It was then argued that it flowed from the foregoing submissions that there were a number
of possible scenarios. However, none of these availed the pursuer.
[89] If as was envisaged by Mr Handley, the existing permissions authorise the
development of a hotel, without limitation on numbers of bedrooms then on that basis, there
is no loss: the proposed development has not been prevented.
[90] If as was envisaged by Mr Mair, the existing permissions authorise the development
of a hotel, without limitation on numbers of bedrooms as long as those permissions have
been implemented then on that basis, there is no loss: as works have commenced and the
permissions have thereby been implemented, the proposed development has not been
prevented.
[91] If as was envisaged by Mr Mair, the existing permissions authorise the development
of a hotel, without limitation on numbers of bedrooms as long as those permissions have
been implemented in the form of operation as a five bed hotel then on that approach (even if
that were correct), there is no basis upon which loss might be assessed: the loss, if any,
would be the difference between (a) building a five bed hotel and then, once established,
converting this to a 35 bed one; and (b) building a 35 bed hotel in the first place. The
Page 31 ⇓
31
pursuer has led no evidence that might allow the court to assess whether that would lead to
any loss at all, or, if it would, to quantify same.
[92] Beyond that, if as now seems to be the pursuer’s contention, they are pinned entirely
to the 2017 planning application plans, then if that is the case the evidence which it has led
as to quantum (which is based on valuing something entirely different from that in respect
of which planning was sought in 2017 – see, for example, the inclusion of the spa and
conference facility) is inept to justify the claim advanced.
[93] Thirdly Mr Dunlop contended that the court had to be satisfied: that the proposed
development was “prevented…by reason only of the existence of the pipeline”.
[94] He submitted that in respect of this requirement the pursuer had clearly failed in that
the evidence was that the proposed development was neither buildable nor viable.
[95] Mr Dunlop developed the above argument in conjunction with his submission that
the pursuer had not fulfilled the burden of proving that any loss had arisen entitling it to
compensation.
[96] The fundamental point in this argument was as follows: the pursuer’s case is
predicated on the ability to create a five star luxury “trophy” hotel, to compete with the likes
of Gleneagles. The pursuer’s valuation evidence depends entirely on successful trading at
the top end of the luxury hotel market. As Mr Pratt properly conceded, if that premise is not
sound then neither is his valuation.
[97] He then submitted that the pursuer had failed to prove that Ury House could host an
arrangement of the above type.
[98] In advancing the above submission the first point he made related to the plans
submitted with the refused application. They, he submitted, did not show something that
could result in the necessary trading levels. He submitted that that had been implicitly
Page 32 ⇓
32
recognised by the pursuer, who placed no reliance on these plans and who asked Colliers to
value something entirely different. He submitted that it was noticeable that Colliers were
unable to refer to any plan representing the hotel that they had purported to value. The
long list of facilities and rooms referred to by Colliers at pages 2048 and 2049 of the witness
bundle did not appear in any floor plans for Ury House, planning or otherwise. He
submitted that this created a substantial problem for the pursuer’s case: the claim was based
on the 2017 refusal and the court should be valuing what was refused permission in 2017
and not something re-imagined, very late on in the case, when the pursuer was faced with
insuperable problems stemming from the 2017 plans and beyond that was not even properly
defined by the valuers themselves.
[99] Also he argued that even if the court were prepared to have regard to the 2018 plans
this did not assist the pursuer. He highlighted a number of difficulties which arose for the
pursuer on consideration of these plans: the plans did not show room sizes, but on the
evidence the space was cramped. A detailed critique of those plans was offered by Dexter
Moren, who was an architect with experience across the globe in designing luxury hotels.
He submitted that there was no persuasive answer to the multitude of problems he raised
with the lack of space and the consequent constraints on any ability to offer five star luxury
standards and “feel”. This problem was not confined simply to room size, things like the
limits on the number of lifts and “back of house” facilities, such that there would be a
constant crossover between guests and staff, pointed strongly away from this being an
operation that would have acquired global renown as a luxury hotel. He submitted that a
particularly compelling piece of evidence in this regard was the un-contradicted evidence
that the pursuer would have imagined a space for dining which could sit a maximum of
22 people, in a hotel with capacity for 70. If anything underlined the unreality of the
Page 33 ⇓
33
proposition, it was this. The suggestion that a client of a five star luxury hotel, tempted
away from a location such as Gleneagles, would turn up for breakfast at 7.30am and be
happy to be told, no doubt politely, that they should return at 9.00am is simple fantasy.
[100] The evidence of Mr Rothwell supported the position advanced by Mr Moren.
Mr Dunlop said this about the evidence of Mr Rothwell. He was an extremely fair witness.
At the end of re-examination, he fairly conceded that certain aspects of the 2018 plans did
start to elevate the proposed hotel towards five star standards. But ultimately his expert
view, with decades of experience in the industry, was that the space available simply did not
permit what the pursuer argues for, namely a five star trophy asset. There was little in the
way of cross-examination of Mr Rothwell, and certainly nothing that might warrant rejection
of his evidence. Moreover, there was no true counter to that evidence. This was the
situation because Mr Lieder, who had been set up by the pursuer as an expert on viability
frankly conceded that he had not been asked to consider the proposed development; had
seen no plans relative thereto; and could thus offer no evidence of assistance in connection
therewith.
[101] He contended that Mr Cleaver’s evidence should be rejected as amounting to no
more than mere assertion.
[102] In conclusion in respect of the issues regarding buildability and viability the multiple
difficulties presented by an attempt to run a 35 bedroom five star luxury hotel from the
limited space available, in the way shown in either the 2017 or the 2018 plans were clear
from the evidence of Messrs Moren and Rothwell. They were echoed by Mr Chess. There
was from the pursuer no explanation at all, let alone a convincing one, as to how those
difficulties might be overcome.
Page 34 ⇓
34
[103] Mr Dunlop next submitted that on the evidence there were clear difficulties in
respect to the funding of the project. It was a necessary part of the pursuer’s case that it
established that the project could be funded. The pursuer’s case on Record is this:
“The sale of the housing units will accordingly generate sufficient funds for the
development of Ury House without the need for additional borrowing.” (See
Article 5 of Condescendence).
However, the evidence did not support this averment. In elaboration of this point
Mr Dunlop referred to the following evidence relative to the sale of the housing units in the
future: of the 230 plots that are supposed to provide a total of £7.5 million only 85 have been
sold, since 2014. Those 85 were sold in a “job lot” to Kirkwood Homes in 2014 (see: JB at
page 701 paragraph 2.5 and Mr Milne’s witness statement in the witness bundle at pages 6
and 7 paragraph 28). Thus no houses have actually been sold to members of the public as
yet. No other sales had been achieved since 2014. The evidence clearly showed a limited
market for the houses. Mr Milne, himself, only thought sales in the future of 30 per year as
being realistic. Even if one were to ignore the fact that the pursuer would be in competition
with Kirkwood Homes, who would be trying to sell their 85 homes, and even if one were to
ignore the evidence showing that not one house has been sold by the pursuer since 2014, at
best for the pursuer that would suggest a pot of only £1 million per year for five years.
Moreover, the evidence suggested that this was not realistic as contemporaneous
correspondence (JB at pages 2115 and 2473) clearly showed the difficulty of selling houses in
the area and the consequent unreality of the suggestion that the enabling development
might actually produce a fund of £7.6 million any time soon.
[104] Moreover there was a further difficulty in respect to funding, namely: the evidence
showed that more than £7.6 million would be needed. Even if there was available to the
pursuer as of now a pot of £7.6 million in cash, that would not be enough to build the
Page 35 ⇓
35
proposed development, when the pursuer’s own quantity surveyor has build costs with an
“irredeemable minimum” of at least £9 million, and where those costs will clearly not result
in a completed and usable hotel, for the reasons which he was advancing in these
submissions. Accordingly, the pursuer required to show access to funds elsewhere. The
pursuer had not established any ability to fund the development other than via the sale of
housing. Mr Dunlop in particular did not accept that Mr Milne’s evidence was that funding
was required only if costs reached £14 million. The evidence of Mr Clark-Hutchison showed
the difficulties that would be encountered by the pursuer in that regard, and there was no
realistic suggestion from the pursuer regarding funding elsewhere.
[105] Thus for the above reasons a five star luxury 35 bedroom house was not buildable,
fundable or viable.
[106] It being the pursuer’s case that but for the existence of the pipeline it would construct
a hotel of said type that is a fatal blow to its case.
[107] Even looking beyond the above there was a further unanswered difficulty in respect
to the pursuer’s case. The pursuer had made no allowance for benefits which had arisen as a
result of the existence of the pipeline.
[108] In assessing whether a party has suffered a loss it is necessary to take into account
any gains which have accrued to the party from the same cause (see: British Westinghouse
Electric & Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd
[109] Mr Dunlop accepted that cases such as Westinghouse related to issues of damages and
the present matter is not such a case. He, however, submitted that it did not follow that the
principles explained in Westinghouse are not relevant to the present case. He then referred to
Page 36 ⇓
36
what he described as the general rule in any damages claim as outlined by Lord Blackburn
The “general rule [is] that where any injury is to be compensated by damages, in
settling the sum of money to be given… you should as nearly as possible get at the
sum of money which will put the party who has been injured, or who has suffered,
in the same position as he would have been in if he had not sustained the wrong for
which he is now getting his compensation or reparation.”
[110] Then turning to the provisions in the instant case he contended that the principle set
forth by Lord Blackburn is very much mirrored by the contractual stipulation here, which
grants “compensation for all losses arising”. He then put forward that provisions designed
to provide compensation for losses caused by wayleaves or servitudes, such as that in the
instant case, have much in common with claims in damages and similar general principles
of causation, onus and reasonableness apply. (See: Arnold White Estates Ltd v National Grid
Electricity Transmission Plc [2014] Ch 385 at paragraph 16).
[111] Looking at the evidence in respect to this issue he submitted that it showed that a
number of benefits had accrued to the pursuer as a result of the existence of the pipeline.
First, absent the pipeline and the perceived restrictions caused thereby regarding the
development of Ury House, the pursuer would not have received permission for a 230 house
enabling development; or planning for the golf course; or planning for the development of
the walled garden. He submitted that the evidence in relation to all of these matters was
plain however the clearest evidence related to the last matter namely the development of the
walled garden. In respect to this last issue he particularly referred to the following evidence:
Mr Mair indicated that there would need to be a justification for the application
for permission to develop the walled garden and by excluding any alternative
option (JB at page 607).
Page 37 ⇓
37
In order to address this, the pursuer instructed a heritage statement which
clearly founded on the restrictions on developing Ury House as a justification for
development of the walled garden (JB at page 998).
Mr Milne himself made submissions to the same effect (JB pages 1025 – 1026).
AC accepted those submissions (see: JB pages 1258, 1259, 1263, 1264, 1272
and 2498).
Lastly, Mr Milne accepted himself both in his original witness statement at
paragraphs 35 and 36 and in cross-examination that the walled garden was an
“alternative” to the original proposal to place the bedrooms within Ury House.
[112] Mr Dunlop continued by contending that the evidential position regarding the
walled garden created a further insuperable difficulty for the pursuer. He described this
difficulty in the following way: he first referred to the pursuer’s pleaded case, which is:
“walled garden development… is a separate and supplementary development to the
proposed hotel development at Ury House. It is not a substitute for the 35 bedroom
development at Ury House which is precluded by the pipeline.” (See the end of
Article 5 of Condescendence).
Looking to that averment he said this: it is irrefutably not made out, and is rather entirely
contradicted, by the evidence.
[113] There is then a further difficulty because presumably because of the pleaded
position, the pursuer has made no attempt to show whether there is a difference between the
ultimate value of the walled garden alternative as compared to the proposed 35 bedrooms in
Ury House, let alone what the difference that might be. Once again that causes an
insuperable difficulty in the pursuer’s case. He went on to submit that even beyond the
above there are further problems for the pursuer when one takes into account the fact that
Page 38 ⇓
38
the evidence also shows an interlinking with the permissions granted to build the
230 houses and the golf course.
[114] The next question raised by Mr Dunlop was this: what is to be assessed? The
relevant part of the condition is this: if there is an entitlement to compensation then
“compensation for all losses arising from [the defender’s] decision not to divert the pipeline
including, without prejudice to the foregoing generality, losses of development value”.
[115] As a matter of contractual construction Mr Dunlop accepted that the pursuer would
point to the width of the words “all losses”. However, it is trite law that the contractual
stipulation must be read as a whole. The generality contains one expressed direction as to
what the assessment of compensation should include, namely: “losses of development
value”.
[116] There was no dispute that development value is an assessment of the extent to which
the value of land is enhanced by the granting of permission to develop it in a certain way. In
the present context, that would entail permission to develop the land as a luxury hotel, such
as to create an income-bearing asset.
[117] Mr Dunlop then said that it was self-evident that one could not award compensation
for loss of development value, and also loss based on the development assuming it actually
to have been completed. This would be double counting: the assessment of development
value already comprehends the potential for the land to become an interest-bearing asset.
[118] From the foregoing there were two consequences: Firstly, it shows that the approach
of the pursuer, which is to ask the court to proceed on the (special) assumptions that the
hotel has not only been built but is successfully trading to a pre-ordained standard, is
entirely flawed. It commits the same errors exposed by the House of Lords in Transport for
London v Spirerose Ltd. There, the question was slightly different: namely whether, when
Page 39 ⇓
39
planning permission was not certain but likely, the land should be assessed on the basis of
full development value, or merely hope value. The House indicated that the latter was
appropriate, because of the lack of certainty that the permission would have been granted.
Applying that approach to the present case, it would not be appropriate to accept the
pursuer’s suggested method of valuation, which proceeds on the assumption that the
property has been built, to the requisite standard, and is trading successfully. None of those
things has happened, and there must be substantial doubt that they could ever happen. It
would not be appropriate to ignore the various risks that someone embarking on a project at
Ury House would inevitably entail and award compensation on that basis. That would be to
pass all risk to the defenders. There is no warrant for that in the wording used in the
servitude.
[119] Second, it leaves the pursuer with a substantial gap in their evidence. As a result of
the valuation approach which it has adopted, it has not attempted to address development
value at all. The only evidence before the court on development value comes from
Mr Chess, and he assesses that there is no development value at all in the refusal of the 2017
permission.
[120] Another way of putting this would be to ask what it is that the court should be
assessing as compensation under the contractual wording used. Two alternatives are put
before the court.
[121] For the pursuer, it seems to be said that the court should imagine a world in which
the land has been fully and successfully developed to a very specific level, ignoring all risks
that this might never have happened or be achieved to the standard assumed, and award
compensation on that assumption.
Page 40 ⇓
40
[122] For the defender, a more conventional approach is adopted: any assessment of
compensation should be designed to represent an amount, in money’s worth and as at the
date of the award, compensating the pursuer for any diminution in value of the pursuer’s
land caused by inability to develop it in a particular way.
[123] He submitted that the defenders’ approach is plainly the correct one. It fits with the
usual method of assessing compensation which builds in the risk that certain things may or
may not happen (see: Allied Maples Group Ltd v Simmons and Simmons (a firm) 1995 1 WLR
1602). It avoids speculation. It avoids over or under-compensation by looking to present
actuality and not future contingency (see: Transport for London). It means that the court will
not commit the error of attempting to award “compensation” for consequences which are
too remote (see: Director of Building and Land v Shun Fung Ironworks 1993 2 AC 111). It
ensures, as parties surely, looked at objectively, must have intended, that the defender
“should not require to pay as compensation a larger amount than the owner could
reasonably have obtained for his land in the open market in the absence of the” pipeline
[124] There can be no sensible quarrel with an approach which measures the loss to the
pursuer occasioned by refusal of planning permission by reference to the contractually
stipulated loss of development value. And if there is no development value, there is no loss.
[125] The pursuer’s difficulties did not however cease. There were further difficulties and
these arose from the evidence on the costs of the development. Mr Dunlop began his
detailed submissions under this head by emphasising that the pursuer had not chosen to put
before the court evidence of what would be the costs of development, by which he meant
the sum of money needed to get the property to the state at which the pursuer asks that it be
valued, namely: fully built and successfully trading. Mr Moir accepted, that he had only
Page 41 ⇓
41
costed the development to a point at which the shell of the building was completed, but,
crucially, (a) not yet with the spa or conference facilities which the pursuer insists are crucial
to the viability of the operation; (b) not yet with any connection, in the form of sewers, or
water, or electricity, or gas, or telecommunications, or roads, to the outside world; (c) not
yet with a garden of any sort, and (d) not yet with any of the fixtures, fittings or equipment
that would be necessary to operate a luxury hotel.
[126] Looking at Mr Moir’s evidence and that given by Mr Robinson it was evident that
Mr Moir, who was the only witness qualified to comment on the full cost plan tendered on
behalf of the defender, responded to Mr Robinson’s report in an entirely benign manner. He
agreed Mr Robinson’s methodology, and offered minor comments in response thereto. In
his evidence, he offered no suggestion that Mr Robinson was in any way “off beam”. He
accepted in terms that he had not valued the fixtures and fittings at all, and for that reason
could offer no comment or critique in respect thereof. In cross-examination he accepted that
the total build cost would be at least £12.3 million.
[127] The pursuer’s only response to the above was an aggressive cross-examination of
Mr Robinson. Mr Robinson was plainly discomfited by his treatment in the witness box.
That was not intended as a criticism of the pursuer’s counsel, who was simply doing his job.
But no amount of such cross-examination can make up for the gaps which he had identified
in the pursuer’s evidence. Mr Dunlop reminded the court that it was the pursuer’s claim
and it was for it to establish what it would cost it to build the hypothetical hotel and to show
that it could do so for less than that asset would ultimately be valued. In summary given the
absence of proof that build costs would be less than ultimate value then even on its own
approach to assessment of compensation the pursuer has failed to make good its claim.
Page 42 ⇓
42
[128] Moreover, Mr Dunlop submitted, the cross-examination of Mr Robinson required
Mr MacColl not for the first time in this case, to attempt to ride two horses. On the one
hand, it was sought to be put forward that the hypothetical hotel would be a trophy asset,
attractive to rich clientele from across the world, ranked among the best in Scotland and
with a value per room which equated to that of Edinburgh’s Waldorf Astoria. On the other,
however, it was said that this could be done “on the cheap”, with a few beds from
John Lewis and some waste paper bins from Ikea. These stances he submitted were
mutually irreconcilable: if the hotel was to be a trophy asset, it would require to be
furnished as such.
[129] In respect to the evidence of Mr Robinson Mr Dunlop conceded that at the best for
the pursuer, Mr Robinson’s assessed costs may be slightly high such as for example in the
mistaken understanding that the spa would be housed in an extension. But what the cross-
examination of him did not do was to detract from the acceptance by Mr Moir that build
costs would be at least £12.3 million. Nor could it: Mr Moir’s own “irreducible minimum”,
with the various stated exclusions, was just shy of £9 million. On any view, the costs of
making the necessary connections, carrying out the various site works, constructing the spa
and fitting out the hotel would add at least £3.5 million, a figure which is less than 50 per
cent of what Mr Robinson costed these items at. Accordingly, Mr Moir was plainly correct
to concede a build cost of at least £12.3 million and in reality it would probably cost more
than that, particularly given the luxury trophy standard that the pursuer insists is necessary
and on which its valuation is predicated.
[130] It did not assist the pursuer’s case to argue, as Mr MacColl did, that certain of the
costs would be accounted for by other parts of the development on the pursuer’s subjects.
Again Mr Dunlop reminded the court that it was the pursuer’s case. It alone knew what it
Page 43 ⇓
43
comprehended in such other developments. Multiple attempts to obtain information as to
viability had been made by the defender, using commission and diligence. It would not do
for the pursuer to say “some of these costs would be borne elsewhere”: it is for the pursuer
to prove what costs would be borne elsewhere, and how. That the pursuer had not done.
[131] With build costs of that sort of magnitude, it can be seen that there is no loss of
development value, even if it is appropriate to pass all risk in the project to the defender and
value it on the basis of special assumptions, as have Colliers; and even if it is appropriate to
ignore the plain fact that the hotel simply could not operate at the required level for the
reasons already explored. With build costs of at least £12.3 million and a valuation which
stands, at best and only using special assumptions, at £12.4 million, there is simply no
development value at all. No one in their right mind would spend £12.3 million on the wing
and a prayer hope that they might, eventually and with a following wind, end up with
£12.4 million.
[132] Once one bears in mind that the true valuation of the property is actually far lower,
for the reasons given by Mr Chess, it can be seen with certainty that there is no loss here.
The pursuer might have been able to put a “nice” 35 bedroom hotel into Ury House, but it
would have been one which was worth no more than £4.6 million. There is no evidence
suggesting that this could have been achieved for costs of less than £4.6 million.
[133] Finally Mr Dunlop submitted that the pursuer relies on the £7.6 million figure as set
out in the section 75 agreement. Mr Dunlop’s response to this was as follows: as Mr Milne
correctly pointed out, that is not “free” money. There is no obligation on the pursuer to
build the 230 houses envisaged by the section 75 Agreement. Here again there is a
disconcerting absence of evidence: the refusal of the pursuer to exhibit the “Restoration
Works” programme referred to in the section 75 Agreement is unexplained, and
Page 44 ⇓
44
inexplicable. But leaving that to one side, the section 75 Agreement creates a complex
arrangement of obligations and benefits. Put shortly, the pursuer will require to expend
significant sums and effort to “win” the £7.6 million that they envisage. There are
requirements imposed, for example, regarding affordable housing – which one would
reasonably assume might be less profitable for the pursuer.
[134] Mr Dunlop then asked the question: what, then, is the court to do with the supposed
pot of £7.6 million? One thing is clear: it does not presently exist, and may never do so. It
must be borne in mind that the £7.6 million will only ever be achieved if the pursuer can
build and sell 145 houses on a site which has not seen a sale since 2014. Colliers were not
asked to take account of this hypothetical fund in providing valuation advice. In oral
evidence, Mr Pratt said it would be taken into account, but not how. More importantly,
Mr Chess explained just how difficult it would be to take account of this factor – and
ultimately the pursuer has simply not provided enough evidence for this to be done. It is for
the pursuer to show the extent to which this money should be taken into account in valuing
the property. It cannot simply be a case of saying “we have £7.6 million for free” (as they do
not, and as Mr Milne explained the money does not yet exist and would certainly not be
free), it would be wrong simply to credit the pursuer with £7.6 million. But no other
approach is advocated, and the evidence does not allow the court to make any assessment of
what, if anything, this money might mean for the claim.
[135] In conclusion Mr Dunlop said: for all of the above reasons, no loss had been proven
by the pursuer. The contractual stipulation under consideration envisages compensation for
loss of development value. No such loss had been proven, and accordingly no entitlement
to compensation was made out.
Page 45 ⇓
45
[136] Lastly Mr Dunlop addressed condition 25(f) in the servitude. It was his position that
if necessary he relied on this particular provision which provides that compensation will not
be payable if planning permission “has been or would have been refused for the proposed
development on grounds unrelated to the existence of the pipeline”. He then asserted that
even if the pipeline had not been in existence the refused application would have been
refused. It did not contain the necessary information, as explained by Mr Handley and as
accepted by Mr Slipper. The application would not have been granted regardless of the
pipeline, and on that further basis the claim failed.
Discussion
Witnesses
Preliminary Issues
[137] In respect to a number of witnesses it was asserted that for various reasons I should
either hold their evidence inadmissible or disregard their evidence in its entirety. Given
these submissions it is perhaps appropriate at this point, before turning to look at the
evidence in detail, to consider these submissions.
[138] In respect to the pursuer’s witnesses it was submitted by Mr Dunlop that I should
discount the evidence of Mr Lieder for the reason that very early in his cross-examination
the witness had said:
“I can only speak to the walled garden project”.
This answer was followed up by this question by Mr Dunlop:
“Can you offer any assistance as to what Ury House offers?”
Which was answered:
“Not looked at that in detail.”
Page 46 ⇓
46
[139] There was no further cross-examination. Mr Dunlop’s position became this: the
witness had not considered the matter in issue, namely: the development of a luxury 5 star
35 bedroom hotel in Ury House, but something entirely different, namely: the development
of a 35 bedroom hotel within the walled garden of Ury Estate.
[140] Mr MacColl’s position was that this was going too far for the reasons which he
advanced.
[141] I do not believe that Mr Lieder’s evidence can be entirely discounted when regard is
had to the whole terms of his witness statement and his supplementary witness statement. I
think in the course of these he does comment on the viability of a 5 star luxury 35 bedroom
hotel in Ury House as well as the walled garden development. In particular he deals with
the issue of the viability of a 5 star luxury 35 bedroom hotel in Ury House when contrasted
with the viability of a five bedroom hotel in Ury House at paragraphs 11 and 12 of his
witness statement. He also considers the issue of the viability of a 5 star luxury 35 bedroom
hotel in Ury House by comparing it to the development of the walled garden as a hotel at
paragraph 16 of his witness statement. In his supplementary witness statement it is evident
he is commenting on the views of Mr Rothwell and Mr Moren in respect to the viability of a
5 star luxury 35 bedroom hotel in Ury House (see for example paragraph 6). He in addition
makes further comments on the viability of a 5 star luxury 35 bedroom hotel in Ury House at
paragraphs 7 and 11 of his supplementary witness statement.
[142] Against that background I am not prepared entirely to discount his evidence. I will
deal with the issue of my detailed assessment of his evidence at a later stage in this opinion.
[143] Secondly it was submitted by Mr MacColl that I should hold the evidence of
Mr Handley as not being admissible. It was not contentious that Mr Handley had been an
Page 47 ⇓
47
actor in the factual issues that were live before the court, in that he had acted for the
defender as a paid advisor in relation to the refused application. At that time he put
forward certain views in respect to the refused application, which he repeated in the course
of his evidence in court, where these views were being put forward on the basis that he was
an expert witness.
[144] It was not contentious that an expert witness requires to be independent and
impartial and provide independent assistance to the court by way of objective unbiased
opinion. An expert may not act as an advocate for a particular party’s cause.
[145] Mr MacColl’s submission in short was that this witness did not meet the said
requirement.
[146] I do not believe that simply because Mr Handley acted as a paid advisor for BP in
respect to the factual matters before the court that this necessarily renders his evidence as
inadmissible having regard to the foregoing test. Rather the proper question for the court to
ask is: when giving his evidence did Mr Handley understand that his duty to the court was
to provide independent and impartial assistance to it? I formed the view that in giving his
evidence to the court Mr Handley understood his overriding duty to provide such
independent assistance. Nothing in the way he gave his evidence or the content of that
evidence caused me any concerns about this essential issue of his independence and
impartiality. I accordingly hold his evidence to be admissible.
[147] Mr MacColl also sought to have the evidence of Mr Stuart Robinson excluded as he
had not shown the necessary objectivity required of an expert witness.
[148] A number of arguments in support of that position were put forward by Mr MacColl.
It appeared to me that the first matter which had to be considered when looking at the
evidence of Mr Robinson and examining the submission of Mr MacColl was this: Mr Moir
Page 48 ⇓
48
who was the witness on behalf of the pursuer in relation to the matters upon which
Mr Robinson was giving evidence first agreed the methodology which had been adopted by
Mr Robinson and secondly I believe that Mr Dunlop fairly assessed Mr Robinson’s evidence
when he said that there had been no suggestion by Mr Moir that Mr Robinson in his reports
was “off beam”. The attitude of the pursuer’s own expert tends very much to suggest that
there is no substantial basis for the argument being advanced by Mr MacColl.
[149] Secondly, it appeared to me that Mr Robinson had sought, insofar as he was able, to
validate the figures which he had produced. As I understood it many of the figures which
he produced were from his company’s database of figures from real developments in
relation to which they had been involved of a similar type to that which had not been able to
go forward at Ury House. I am persuaded that this is an entirely acceptable method of
approach to providing costings.
[150] Thirdly, he was instructed to prepare his costings from first principles and therefore
in respect of work already done at Ury House he did not use the actual figures but did, as he
was asked, look at what figures he believed were reasonable for that part of the
development. When this was the approach he was asked to take when preparing his report,
I do not regard it as a valid basis for criticising him that he followed this approach. In
addition it is noteworthy that when his figures prepared from first principles are compared
to the actual figures there is no material difference.
[151] Fourthly, he accepted that there might be items for which he had provided costs
which an owner might decide at some later stage he did not wish or he wished to put in
some slightly cheaper alternative. However, given that he was preparing his cost analysis at
a very early stage in the development and the only information he was provided with were
the plans and that the proposed development was a 5 star luxury 35 bedroom hotel I find his
Page 49 ⇓
49
concessions hardly surprising. I do not believe these concessions undermine his
independence or objectivity. On the evidence such alterations by an owner were entirely
normal. There was nothing in his evidence which made me think that he was seeking to
deliberately inflate the cost figures. There were perhaps a few instances of double counting,
however, again given the number of separate items he was required to cost I did not find
this surprising and it did not lead me to form an adverse view of this witness’s evidence as a
whole.
[152] Lastly, in respect to this issue of whether I should have any regard to his evidence I
do note the point made by Mr Dunlop that in approaching the figures he discounted a very
substantial figure which had in fact been put forward by the pursuer and I think it is proper
to say that this reflects the general fairness of his approach.
[153] Overall I am not prepared to exclude Mr Robinson’s evidence. I think he could
properly be regarded as an expert witness.
[154] I was also asked by Mr MacColl to disregard in its entirety the evidence of Mr Moren
and Mr Clark-Hutchison. I reject these submissions and will give my reasons for my view
when I look in detail at the evidence of these witnesses.
[155] As I consider the various issues and the witnesses who gave evidence regarding each
issue I will comment upon my assessment of their evidence. I observe at this point that in
respect of all of the witnesses who gave evidence I believe they were credible witnesses, in
the sense that they sought to do their best to tell the truth.
The issues
[156] The primary requirement in terms of condition 25 is that the pursuer genuinely
wishes to develop Ury House into a five star luxury 35 bedroom hotel. It is argued by
Page 50 ⇓
50
Mr Dunlop that that is the natural reading of the first sentence of the condition. No
alternative construction was put forward by Mr MacColl.
[157] Mr Milne is the controlling mind of the pursuer. Accordingly, this issue turned to a
very large extent on his evidence. In his witness statement between paragraphs 13 and 24 he
sets out the lengthy planning history relative to Ury House and his wish over a considerable
period of time to have a hotel in Ury House to go alongside a Jack Nicklaus golf course.
[158] At paragraph 24 he explained that the five bedroom planning permission for
Ury House which he had was: “unlikely to be financially successful”. He follows this by
saying the following at paragraph 25 of his witness statement:
“We thus sought to explore that with Aberdeenshire Council’s planning team, and to
discuss the possibility of a 35 bedroom hotel. It was clear to me from the outset that
the constraints on use of the land caused by the pipeline were going to be a problem.
As I note above, the castle is in the inner blast zone according to HSE’s PADHI
guidance and it was difficult to see how it would be possible to create a 35 bedroom
hotel with all bedrooms in the castle.”
[159] He then turns to the refused application and says this at paragraph 26:
“Nonetheless, we made a formal application for planning consent for a 35 bedroom
hotel with all bedrooms located in the castle… We did so as it was the only way of
evidencing the difficulties which the location of the pipeline was causing for the
development we envisaged at Ury Castle. We were criticised by BP in a previous
court action prior to the application for planning consent for a 35 bedroom hotel
being made for not being able to show that the pipeline was the reason for our
inability to create a 35 bedroom property. I felt we had no alternative but to apply
for planning consent even though I recognised it was likely to be recommended for
refusal. It was not a huge surprise to me when consent for a 35 bedroom proposal
was in fact refused.”
[160] Accordingly, it is clear that at the date of the making of the refused application
Mr Milne was aware it was likely to be refused in light of HSE’s well understood position
regarding the building of such a hotel within Ury House due to Ury House’s position in
relation to the pipeline. However, it does not necessarily follow that Mr Milne did not
genuinely wish to develop Ury House into a luxury five star 35 bedroom hotel. The lengthy
Page 51 ⇓
51
planning history, the work done regarding the golf course, the putting in place of the
section 75 agreement (the enabling development), the substantial money spent on
Ury House and the lack of commercial viability of a five bedroom hotel in Ury House
strongly support a genuine wish on his part to develop a five star luxury 35 bedroom hotel
in Ury House.
[161] Mr Milne in his evidence did not accept the lack of viability or buildability of a five
star luxury 35 bedroom hotel in Ury House. I thought that he was genuine in his belief that
the proposed development could be built and was viable. Nothing surrounding the issues
of buildability and viability caused me to believe that he did not have a genuine wish to
develop such a hotel within Ury House.
[162] Lastly, he accepted that the plans submitted with the refused application had certain
problems, the most obvious being a lack of matching staircases between the ground and first
floor. However, it was his position that the points highlighted in respect to the plans could
be dealt with at a later stage. I believed he was genuine in his view on this.
[163] As regards the plans which were submitted with the refused applications it is correct
that they were produced in house and by the use of a stamp were “passed off” as being from
Mr Morgan’s firm (the pursuer’s retained architect) and basics such as the marrying of
staircases had not been achieved. However, I do not think that it follows the application
was not genuine, rather it suggests that it was a somewhat hurried application made
following the problems with the first action. I think it is noteworthy that despite the points
made regarding the plans the application was not rejected by AC because either the
documentation accompanying the plans was insufficient or the plans themselves were such
that consideration of the application could not proceed. This again is suggestive of a
genuine application.
Page 52 ⇓
52
[164] So far as Mr Milne’s failure to follow up the suggestion of AC that the existing
permissions would allow additional bedrooms. First I believe that the email from Mr Mair
in which this matter was raised shows the genuineness of the refused application. He is
someone who was well aware of the whole planning history relative to the pursuer’s
subjects and he, with that knowledge, appears to believe the refused application to be
genuine otherwise he would not be writing an email in these terms. Secondly, Mr Milne
does respond to the suggestions made in the email. In his reply to AC’s email at P1207 JB he
gives reasons why he does not believe that the course suggested by AC should be followed.
In particular he has concerns about the likelihood of a change in HSE’s established position
and, as I understand it, he has concerns, detailed in the second last paragraph, of the
viability of developing a 5 bedroom hotel and thereafter altering it to a 35 bedroom hotel
once the 5 bedroom hotel had been implemented. His attitude to ACs suggestions appears
reasoned and it is not just a blank rejection of AC’s suggestions without any consideration
which might have suggested a lack of genuineness in the application. Thus I believe this
correspondence does not support the contention that the refused application was not a
genuine one. As I said at the outset this issue turned very much on the credibility of
Mr Milne. I found Mr Milne to be a reasonably impressive witness. I thought at all times he
was doing his best to tell the truth and in particular I believe he was doing this in respect to
this issue.
[165] In conclusion it seemed to me that Mr Milne was genuine in his wish for a luxury
five star 35 bedroom hotel to be built at Ury House. I accepted his evidence on this issue. I
believed his evidence was credible and reliable. His evidence was supported, I felt, by the
surrounding circumstances. The particular factors relied on by the defender when analysed
I do not think supported the position Mr Dunlop was advancing. I accordingly find that
Page 53 ⇓
53
there was a genuine wish on the part of the pursuer to develop a five star luxury
35 bedroom hotel within Ury House.
[166] The next point to consider is this: it is a requirement in terms of clause 25 that the
proposed development was “prevented [by] the existence of the pipeline”. Accordingly the
next issue becomes: was the proposed development prevented by the existence of the
pipeline?
[167] This issue turned on what was a sound construction of the existing planning
permissions. In particular the question was: did the existing planning permissions place a
restriction on the number of bedrooms permitted at Ury House, namely: five?
[168] I am persuaded that on a sound construction of the existing planning permission that
the part of each of the permissions which is in the following terms: “and in accordance with
the plan(s) docquetted as relative hereto and the particulars given in the application… Grant
full Planning Permission” cannot simply be ignored. The whole terms of the planning
permission have to be had regard to and not just parts of it.
[169] The next question is this: what is the effect of these words in respect to the issue
before the court?
[170] The evidence in respect to this question is fairly limited and came from Mr Mair,
Mr Handley and to a limited extend from Mr Slipper who in the joint note of meeting of the
experts on planning issues said this: “That internal alterations do not require planning
permission but would require listed building consent” (see: notes of meeting no 37 of
process page 3).
[171] Looking to the evidence of Mr Mair and Mr Handley they were in agreement as
follows: the above wording in the planning permissions was not an absolute prohibition on
the pursuer building a 35 bedroom hotel in Ury House.
Page 54 ⇓
54
[172] There is an indication at an early stage that it was Mr Mair’s view that the foregoing
was his understanding of the position. In an email from him to Mr Milne of 7 March 2017
(JB 1208) (to which reference has already been made) he said this:
“I do think it is worth sitting down with HSE. I explained to HSE on the phone what
I did to you at the end of last week – Ury House has been granted change of use to a
hotel. So in the future (once the use as a hotel has been implemented), you could
form additional rooms without the need for consent. They weren’t too fussed by it.
But, in terms of them balancing the ‘what you could do and what they would let you
do’, I would imagine that they would be pragmatic and seek to approve this
application while it is still something they can control.”
[173] The context of this email is that the refused permission was still under consideration
at that point.
[174] Mr Mair gave evidence in respect to this issue and said this in his supplementary
statement at page 234 of the joint bundle:
“ It is correct that, in theory, once the hotel had been built as the 5 bedroom
development (that permission had been granted for) and commercial
operations had begun, that there could then be internal changes to the layout
and number of rooms (subject to listed building consent or any further
consents required for external works). That is what I meant in the email that
is quoted by Mr Handley at paragraph 3.11.
There is also the argument that even if the 5 bedroomed hotel had been built
and was operational that increasing the number of bedrooms from 5 to 35
could constitute a material change of use and fresh planning permission
would be required. There would be a number of things to consider in making
that the assessment about whether or not the increase was material or
non-material.
However, if building had begun for the development of the house into a hotel
based on the 5 bedroom consent (but the hotel had not, yet, become
operational) and at that stage the owner decided that they wanted to change
it from 5 to 35 bedrooms – then that would not be permitted without
additional planning permission. The council would be entitled to take an
enforcement action (either at the stage where a listed building wall had been
altered without consent or when the 35 bedroom hotel had become
operational). When the 2017 application was submitted there was no
permission in place for 35 bedrooms to be built and, as above, unless the
5 bedroom hotel had been built and then become operational the owner could
Page 55 ⇓
55
not simply change the 35 bedrooms as there would be no established use to
rely on at that stage.”
[175] There appears to be a degree of backtracking in his evidence from the very positive
and uncaveated view which he expressed in his email. However, he did not depart from the
core of his position that the existing permissions did not per se prevent the use of Ury House
in the future as a hotel with more than five bedrooms without the pursuer requiring further
planning permission.
[176] The uncaveated view expressed in the said email was in summary also the view of
Mr Handley.
[177] The issue that separated the evidence of Mr Handley and Mr Mair on this question
was this: in terms of the planning legislation at what point did implementation occur. As
Mr Mair made plain his view was that implementation occurred once the use of Ury House
as a hotel had been established. With this position Mr Handley disagreed. It was his
position that implementation took place when development began.
[178] In respect to this issue my attention was directed by Mr Dunlop to section 27(1) of
the 1997 Act which provides:
“Subject to the following provisions of this section, for the purposes of this Act
development of land shall be taken to be initiated—
(a) if the development consists of the carrying out of operations, at the
time when those operations are begun;
(b) if the development consists of a change in use, at the time when the
new use is instituted;
(c) if the development consists both of the carrying out of operations and
of a change in use, at the earlier of the times mentioned in paragraphs
(a) and (b).”
Here the existing permissions allow for “Alterations and Reinstatement of Derelict Mansion
House for Use as Hotel”.
Page 56 ⇓
56
[179] Accordingly I believe the provisions at subsection (1)(c) of the above are engaged
and therefore development begins or is initiated at the date operations begin, that being the
earlier date in the present case, operations having already begun on Ury House to put it into
a wind and watertight state. I was not directed to any other provision of the 1979 Act by
Mr MacColl in relation to this question.
[180] Some support for this being the correct understanding of the position is found in
consideration of what happened in 2018 when the pursuer made the 2018 application for
planning permission. The extent of the difference between the existing permissions and the
2018 application together with HSE’s views on this are summarised in a letter from
Mr Reston of HSE at page 717 of the joint bundle (witness statements) where he says this:
“The proposals in APP/2018/0826 seek to redevelop all four floors of Ury House. The
upper floor proposals are for five large bedroom suites with the remaining three
floors allocated for a range of leisure and indoor uses (gym, pool, dining room,
lounge x 3 x bar x 3 x function hall x conference suite x 5). HSE assesses these to be
two distinctive development types. The upper floor for the five bedroom suites is
SL1 hotel (DT2.2) and the remaining three floors DT2.4.>25m² is SL2. HSE advises
against significant > 250m² indoor use by the public (SL2) in the inner zone of any
major hazards like on a pipeline.”
It is clear from the above that there are very substantial differences between the
2018 application and the existing permissions in relation to Ury House.
[181] Despite the extent of the differences between them AC advised that there was no
need for this application as it only involved internal alterations at Ury House. It was, as I
understand it, withdrawn. The hotel in Ury House was not at this point trading, however,
there was no suggestion that it needed to be trading for the pursuer to proceed with these
substantial and material alterations to their existing permissions without further planning
permission. Beyond that, I observe the pursuer was in addition, if it proceeded with what
Page 57 ⇓
57
was proposed in the 2018 application not acting in accordance with the docquetted plans in
the existing permissions.
[182] As argued by Mr Dunlop there was no evidence and no explanation as to why the
position would be any different in respect to internal changes relative to the number of
rooms. The effect of the changes would be the same, namely: increasing materially the use
of Ury House by members of the public.
[183] Moreover, I observe there is a conditions section within the permission documents
and no condition appears limiting the number of rooms to be built. I believe if the planning
authority wished to prevent the pursuer developing a hotel with more than five bedrooms
without seeking further planning permission then it needed to attach a specific condition or
restriction to the planning permission. It did not do so.
[184] In conclusion on a proper construction of the existing permissions there is no
condition which limits the use of Ury House to only five bedrooms.
[185] The phrase “in accordance with the docquetted plans” for the reasons I have already
detailed does not prevent a hotel with more than five bedrooms being developed at
Ury House. There is no need to obtain further planning permission in order to develop a
35 bedroom hotel within Ury House once development has occurred, which in the context of
the present case is on the commencement of operations and these operations have
commenced.
[186] I believe the following consequences flow from my above conclusions regarding the
proper construction of the existing permissions.
[187] First, the pursuer is entitled from the relevant date in terms of section 27(1) of the
1997 Act to develop a 35 bedroom hotel in terms of the existing permissions and the relevant
date is the commencement of operations, which has happened. Accordingly, a 35 bedroom
Page 58 ⇓
58
hotel in Ury House could be developed on the basis of the existing permissions and
therefore such a development is not “prevented [by] the existence of the pipeline” thus for
this reason the pursuer’s action must fail.
[188] Even if I am incorrect in my above conclusion in respect to the date at which the
development has been implemented and Mr Mair’s view that implementation does not
occur until the start of operation of a five bedroom hotel I consider that Mr Dunlop is
correct, for the reasons which he advances, that there is no basis in the evidence upon which
loss may be assessed. In summary no evidence has been led on behalf of the pursuer
providing a proper comparator upon which an assessment of loss could be carried out. I
believe that the proper comparator must be as suggested by Mr Dunlop and no such
evidence was led.
[189] Beyond that, even if I am wrong in respect to both of the above conclusions and the
various caveats put forward by Mr Mair require to be taken into account, I am not satisfied,
on the evidence before me that a five star luxury 35 bedroom hotel in Ury House has been
prevented by the existence of the pipeline. It was not a contentious matter that the onus in
proving the foregoing was on the pursuer. Thus it was for the pursuer to prove that the
issue of “material change” referred to by Mr Mair would arise and if it did arise that it could
not be overcome. I have heard no evidence which would entitle me to hold that either of
those factual matters has been established.
[190] Thus on any possible scenario the pursuer has not persuaded me that it has satisfied
the said requirement in the provision. It follows that for these reasons the pursuer’s case
must fail.
[191] There is one further matter with which I should deal before leaving this issue of the
proper construction of the existing planning permissions. It was put forward on behalf of
Page 59 ⇓
59
the pursuer that even if as a matter of law the pursuer is not prevented by reference to the
docquetted plans to confining any development at Ury House to 5 bedrooms that
nevertheless no reasonable developer would proceed in the whole circumstances to develop
a 35 bedroom hotel and therefore the development of such was prevented by the existence of
the pipeline. I do not believe that argument is sound. If the pursuer genuinely wishes to
proceed with the proposed development there is for the reasons that I have set out a sound
legal basis upon which he can proceed. He cannot simply say I will not adopt that course.
[192] There is also I believe a further fundamental and separate difficulty in relation to the
position advanced by the pursuer which arises from the issue of the 2018 application above
discussed.
[193] That difficulty arises in a number of guises. First so far as the evidence led by the
pursuer in relation to quantum this has regard to what is contained in the 2018 application.
Thus the valuation upon which the pursuer relies includes among others a valuation of a
hotel with a spa and a conference facility which do not form part of the refused application,
rather they appear in the 2018 application.
[194] Accordingly I do not believe that the valuation supports the case advanced by the
pursuer which is averred to be this “… the development of a 35 bedroom hotel at Ury House
(as proposed in application APP/2017/0241) was readily buildable, from both a commercial
and practical perspective” (see: Article 6 of condescendence).
[195] The valuation produced by Colliers is one which does not reflect the refused
application and therefore does not reflect the pursuer’s pleadings. Rather it reflects
something which is substantially different. Accordingly it is not apt to support the
pursuer’s pleaded case.
Page 60 ⇓
60
[196] Moreover this particular stance of the pursuer highlights an underlying conflict in
the approach of the pursuer. On the one hand the pursuer contends that the existing
permissions do not allow the building of a 35 bedroom hotel in Ury House because of the
docquetted plans, however, the refused application, if granted, would somehow have
permitted them to have a spa and conference facilities not contained in the docquetted plans.
This tends to support the view I have reached in regard to the proper construction of the
existing permissions.
[197] There is I consider a further difficulty with the Colliers valuation. I note from page 2
of their initial report that what they have valued includes: “planning permission for 32
bedrooms to be developed in the walled garden”. In the pursuer’s written submissions it
contended as follows:
“This sum is the difference in the value between a luxury five star thirty five
bedroom hotel with Jack Nicklaus golf course at Ury House (being £12,400,000)
which would be developed in the absence of the Pipeline and a luxury five star
bedroom hotel (with the same facilities) there (being £800,000), which is all that can
be developed at Ury House under the extant planning permission, less the further
sum of £716,810, being the additional build cost for a thirty five bedroom hotel at Ury
House over a five bedroom hotel there.”
That is not what Colliers have valued. In addition they have valued the 2018 planning
permission. This does not reflect the pursuer’s pleaded position or the position that it
advanced in submissions. Again, this shows that the valuation is not apt to support the
position advanced by the pursuer.
[198] Moreover in respect to proving that in terms of Clause 25 the proposed development
was “prevented by the existence of the pipeline” it is a further necessary element for the
pursuer to prove that the proposed development was achievable as a matter of practical
reality.
[199] This raises a number of issues:
Page 61 ⇓
61
Whether what is proposed is buildable?
Whether what is proposed is affordable? In other words is the pursuer in a
position to fund the proposed development?
Is the proposed development viable, namely: could the proposed hotel trade at
an appropriate level to be financially viable?
[200] The above considerations are also of relevance in respect to the question of the
pursuer’s entitlement to compensation for “all losses arising from (the defender’s) decision
not to divert the pipeline”.
[201] I turn to the first question which is this: Is what the pursuer intends to create,
namely: a five star luxury hotel with 35 bedrooms in Ury House buildable? This question to
some extent overlaps with the issue of financial viability.
[202] I have already commented on the difficulty for the pursuer’s case that Colliers in
valuing the hotel take into account not just the refused application, but the material changes
proposed in the 2018 application . There is a further difficulty with Colliers’ valuation
which is this: At page 2048 and 2049 of the witness joint bundle in the course of its report
Colliers’ values a hotel with 35 bedrooms arranged within Ury House as follows:
18 bedrooms on the first floor 17 on the second floor and accompanying this is a table setting
out the sizes of each room.
[203] However, in the course of evidence Mr Pratt accepted that none of the plans which
were before the court reflected such an arrangement of bedrooms. When it was put to him
that none of these plans reflected bedroom sizes as contained in his report he replied that he
had not measured the room sizes.
[204] Where the question of how the proposed number of rooms could be fitted into Ury
House was an issue and where room size was also an issue it is I believe a material flaw in
Page 62 ⇓
62
the valuation evidence presented on behalf of the pursuer that it does not accurately reflect
any particular plans far less the 2017 or the 2018 plans in the foregoing respects. The answer
by Mr Pratt was to the effect that what he was valuing was a 35 bedroom hotel and that the
layout of the rooms within Ury House and their specific size did not have an effect on that
valuation. It did not appear to me that this provided an acceptable answer to these points.
Room sizes and layout did appear to be significant issues when the issues of buildability and
viability were being considered and I did not think that this point could be appropriately
put aside by simply saying that what was being valued was a 35 bedroom hotel.
[205] In summary my view is that “the proposed development of the land (which has
been) prevented” can, on a proper understanding of condition 25, only be that contained in
the 2017 plans not that contained in the 2018 application or some development which is not
vouched in any plan. It is the 2017 plans which underpin the refused application. I consider
it correct that the court should be valuing what was refused planning permission in 2017 not
something which is substantially different. Accordingly the pursuer’s evidence in relation
to the issue of proving that a 35 bedroom five star luxury hotel could be hosted within Ury
House and if so what loss flows therefrom fails at this first hurdle as it is not tied to the 2017
plans, which was what was refused.
[206] Beyond that it seems implicit in the approach of the pursuer that it is accepted that
the 2017 plans would not produce a buildable and viable hotel. Thus its wish to have valued
by Colliers something which includes elements from the 2018 plans.
[207] Assuming I am wrong in my above conclusion relative to what should be valued I
turn to consider the development which has been valued by Colliers which is a combination
of the refused application and certain elements of the 2018 application and the walled
garden permission.
Page 63 ⇓
63
[208] The defender led two witnesses in relation to the issue of buildability and viability:
first Mr Dexter Moren. He had considerable expertise in the design and space planning of
luxury hotels and had completed several hundred such projects.
[209] He made the following points about the buildability of a five star luxury 35 bedroom
hotel within Ury House.
Guest and service circulation within the proposed design were not kept separate
and this is a requirement in order to achieve a five star luxury feel to a hotel.
The bulk of the rooms were less than 30m2 and were accordingly of insufficient
size to support a luxury five star hotel. He based this view on his experience
working with many five star luxury hotel brands and in particular had regard to
their requirements that rooms in such hotels should have a minimum size of
30m2 and often required a minimum of 35m2.
There were insufficient suites for a five star luxury hotel. What was said to be a
suite was not a suite in that in order to get into the public area of the suite you
had to go through the bedroom area.
There was insufficient linen space.
There were level difficulties in bedrooms 9 and 12.
The dining room was of insufficient size. Too little space was given to each
guest who was dining there. What was regarded as an appropriate figure for the
area required by a diner in a five star luxury hotel was between 3 and 4m2. In
this dining room there would only be 2.5m2. Moreover, the dining room could
only seat 22 persons a wholly insufficient number given that there were
35 bedrooms.
There was insufficient assembly space for the proposed conference facility.
Page 64 ⇓
64
The kitchen was relatively small.
In order to serve food in the lounge and bar plates had to be taken through the
reception area (this was simply not five star luxury standard).
The lower ground floor area had inadequate space to bring goods into the hotel.
The bar storage area which would be required in a five star luxury hotel in order
to have considerable storage for wines was wholly inadequate.
The staff canteen was of inadequate size given the likely number of staff
required to support a five star luxury hotel.
The design of the leisure/pool facilities was not appropriate as it required
persons in swimwear to walk along past the spa reception.
He also highlighted at pages 2391 and 2392 of his report various difficulties in
the plans submitted which in summary he stated made the “2017 application …
incomprehensible and unbuildable as submitted”.
[210] There was criticism of Mr Moren by Mr MacColl that he was dogmatic and tended to
offer ipse dixit opinion. I do not believe that these criticisms were justified. I found the
witness to be reasonably impressive. He gave clear and fully reasoned evidence in support
of the conclusions he reached regarding the issue of buildability and viability. In particular
his views regarding the size of the rooms required for a five star luxury hotel he based on
considerable experience of designing hotels in this specific category. He in particular
founded on the requirements of operators of hotels in this particular class. He gave his
evidence in a trenchant manner, however, I believe overall that his evidence was balanced
and soundly based. Mr MacColl also said there was nothing to show that the witness was
an architect of world renown and he had no experience in the Scottish market. The witness
asserted that he had certain experience. I saw no reason why I should reject that evidence.
Page 65 ⇓
65
On the basis of that evidence he was clearly able to give expert evidence. No positive
evidence that he did not have the necessary experience was led. So far as his experience of
the Scottish market was concerned I do not understand that what in Scotland would be
classed as a five star luxury hotel would be different from other parts of the UK.
[211] The second witness led on behalf of the defender regarding this aspect of the case
was Michael Rothwell.
[212] Mr Rothwell had 32 years’ experience in the hotel field and in particular in the
management of hotels. He now operated hotels through his company on behalf of other
owners. He had done this for approximately 10 years. I found that his views largely echoed
those of Mr Moren.
[213] I observe that he agreed with Mr Moren’s view as to the minimum size of a standard
five star luxury hotel room as being 30m2 and that superior rooms which would be expected
in such a hotel would have a minimum size of 35m2.
[214] He made the following additional points:
There was only sufficient room for one suite which was inadequate for this type
of hotel.
The corridors were too narrow for a five star luxury hotel.
Storage facilities on bedroom floors were inadequate.
The plans only had one lift. For a hotel of the proposed standard he felt two
were required.
There were insufficient restaurants for a five star hotel.
The kitchen size he described as woefully inadequate.
Page 66 ⇓
66
Back of house facilities were inadequate as they did not provide the space to
support the level of service required of a five star luxury hotel. He detailed these
matters further at pages 2437 to 2440 in the joint bundle.
[215] I found this witness’s evidence to be thoughtful, fair and well-reasoned. Where
possible he referred to standards to back his evidence. Otherwise he relied upon his
considerable experience to found his views. I believe he was perfectly entitled to do so.
[216] It seemed to me that the essential fairness of his evidence was shown by his
observations at 4.6 of his report where he accepted that the AA had become less prescriptive
in respect to the size of rooms when considering the issue of granting five star luxury
accreditation. The carefulness of his report was also shown by his having taken further
steps to check the position by having an informal meeting with a senior member of the AA
regarding this issue (see: paragraph 4.1 of his report).
[217] In my view these two impressive witnesses presented a powerful and consistent
body of evidence to the effect that the proposed development could not turn Ury House into
a 35 bedroom five star luxury hotel.
[218] In response to this evidence the pursuer relied on the following witnesses, first
Mr Norbert Lieder. This witness had considerable experience in hotel management and in
particular through his management company ICMI presently managed, among others, the
following hotels: Cromlix House, Greywalls and Inverlochy Castle Hotel. His management
company had entered into a management agreement with the pursuer to manage a hotel on
the Ury Estate.
[219] In his witness statement he does not in any detail cover the type of issues which
Mr Moren and Mr Rothwell cover in their reports and in their evidence. His statement only
gives very general evidence on the issue with which the court has to grapple. In his
Page 67 ⇓
67
supplementary witness statement he seeks to deal with the issue of the minimum room size
and at paragraph 6 of this makes certain observations. He does accept the “general principle
that rooms should be of an acceptable size” but says that many country house hotels in
buildings such as Ury House will not be able to produce uniform room sizes and not all
rooms may meet the minimum requirements referred to by Messrs Moren and Rothwell but
still achieve 5 star accreditation. However, he does not comment in detail on the size of the
rooms presently proposed for Ury House as Messrs Moren and Rothwell do. In the
following paragraph he comments that his agreement to operate the hotel was entered into
“when detailed plans for the hotel were not yet agreed” and he has “not been involved, at
this point in detailed consideration of the plans of the hotel” (see paragraph 10). It appears
to me that this witness’s evidence is of limited value to the court due to not having
considered the plans in detail and therefore not being able in detail to comment on the raft
of criticisms made by Messrs Moren and Rothwell. The evidence of this witness was too
broad brush and insufficiently detailed properly to counter the evidence of the defender’s
experts. Overall I was of the view that he had not given adequate consideration to the issues
of buildability and viability of a 5 star luxury 35 bedroom hotel within Ury House.
Moreover, it did seem, as he accepted himself in the course of cross-examination that his
thoughts were in large part directed to consideration of a hotel in the walled garden. I
believe the evidence of Messrs Rothwell and Moren has for these reasons to be preferred to
the evidence of Mr Lieder.
[220] In addition the pursuer relied on the terms of the second Collier report prepared and
spoken to by Mr Pratt and Mr Cleaver. At section 2.3 of this report certain of the
shortcomings of the proposed plans advanced by the defender’s witnesses are commented
upon.
Page 68 ⇓
68
[221] The point is made that to achieve the standard of a five star luxury hotel not every
room needs to be 30m2 and that generally there is a degree of subjectivity applied when for
example the AA is applying its rating system. As I have already mentioned this was a
matter that was accepted by Mr Rothwell. The report of Colliers also relies on the STR
hotels database in Scotland and its rating system for five star luxury class hotels and
believed that the proposed development would achieve such a rating on this site.
[222] The report goes on to say that its compilers are aware of five star hotels which have
narrow corridors, no lifts and do not offer a variety of dining options. It says that other
operational issues could be dealt with by way of non-material amendments to any planning
permission at a later stage.
[223] In regard to the question of certain matters being dealt with by non-material
amendments I accept it may be possible to deal with certain matters such as the stairways
not meeting in the plans to be dealt with in this way. However, the particular problems
arising from the size limitations of the building and seeking to place within that building all
of the requirements for a five star luxury hotel I judge cannot be dealt with by such minor
amendments.
[224] The pursuer also led Mr Morgan, a very experienced architect, who had since about
2001 been involved in the development of the pursuer’s subjects and had experience with
two companies in the hotel sector. The broad thrust of the defender’s experts’ criticisms
were put to him in cross-examination and in summary he maintained that a 5 star luxury
hotel with 35 bedrooms could be built within Ury House. In respect to room size he was not
able to give the precise size of rooms in the proposed development, however his position
was this: 5 star accreditation was not wholly down to square metres, rather it depends on
standard of fit out and service given to customers.
Page 69 ⇓
69
[225] Looking to the evidence on this issue as a whole, I have already set out that I did not
find Mr Leider’s evidence of any real assistance. So far as Mr Cleaver is concerned (who
was the witness from Colliers who principally gave evidence on this issue) I accept that he
has considerable relevant experience with regard to the issue before the court. I reject the
criticisms that his evidence was ipse dixit. Where possible he supported it by reference to
objective standards and otherwise based his views on his wide experience. However, I did
not find his evidence regarding the practicability of achieving a 5 star luxury 35 bedroom
hotel in Ury House convincing. It did not I believe answer the essential question of taking
all of the criticisms of the proposed development cumulatively advanced by the defender’s
experts, would the proposed development have the feel of a 5 star luxury hotel and would
guests have a 5 star luxury experience: given inter alia the size of many of the rooms; the
problems in fitting out that size of room to give it a 5 star luxury feel; the lack of dining
options and the very small size of the single restaurant when taken together with all the
other criticisms. His approach in response was to say: there are 5 star luxury hotels with
rooms under 30m2; there are such hotels which have only one dining room and so on. This
did not however, provide an adequate answer in respect to a hotel which did not just have
one such problem but had all these problems.
[226] I do not think that Mr Morgan added very much on this issue. He has considerable
knowledge of Ury House, but I did not think he had any great experience and certainly not
as much experience in respect to the 5 star luxury end of the market as the defender’s
witnesses. In particular I do not believe he was able to speak with the same knowledge of
that sector of the hotel industry regarding many of the criticisms made by the defender’s
experts.
Page 70 ⇓
70
[227] In conclusion for the reasons set out I preferred the evidence of Messrs Moren and
Rothwell who I found to be impressive witnesses, who provided clear, fully reasoned and
supported evidence.
[228] Overall when the evidence on this issue is looked at in the round the clear
impression I have formed is that the proposed development is trying to put a quart into a
pint pot. It appears to be seeking to achieve a five star luxury hotel of a certain size in a
space which will simply not accommodate it. Ury House is simply not of sufficient size to
incorporate all the necessary elements for it to be accredited at the level of a five star luxury
hotel. Moreover, because of this overall problem of inadequacy of space which has been
identified it is I believe on the evidence not possible for the proposed development to offer
the feel of a five star luxury hotel, which was identified at all hands to be the critical point.
So not only do I feel that it would not be accredited at the appropriate level I do not believe
it would be able to offer the feel and experience of a hotel at the requisite level. The
proposed development will simply not produce what the pursuer intends, a 5 star luxury
hotel with 35 bedrooms within Ury House. The clearest example of the problem of size
constraints was in respect to the dining room. It was clearly of an inadequate size for a
five star luxury hotel of this size. The defender’s evidence on this issue was in no way
countered by any evidence led on behalf of the pursuer.
[229] Accordingly I believe that in respect to this issue of buildability and viability a
35 bedroom five star luxury hotel in terms of the proposed development is simply not
achievable. For this further reason the pursuer’s case must fail as the buildability and
viability of the proposed development is fundamental to its case.
Page 71 ⇓
71
[230] Beyond the above there is the issue of funding. The pursuer’s case on record was
that the sale of the houses in terms of the section 75 agreement would provide sufficient
funding to carry through the proposed development.
[231] On no view of the evidence was the foregoing made out.
[232] There are 230 housing plots provided for in terms of the section 75 agreement and
that is supposed on the sale of these to provide a total sum of 7.6 million pounds. However,
on the evidence there seemed to be substantial difficulties in achieving the sale of these
properties.
[233] From 2014 to the date of proof only 85 had been sold and these had required to be
sold in a single lot. No actual sale to the general public had been achieved by the date of
proof. The only evidence led on behalf of the pursuer regarding the likelihood of future
sales of this housing came from Mr Milne who said that 30 houses per annum would be
sold. He offered no evidence to support that assertion and given the sales to date I think it
highly unlikely that this annual sales figure would be met. There is in essence other than
Mr Milne’s say so nothing to suggest that this figure is achievable. In putting forward this
figure I do not believe Mr Milne’s evidence was reliable. Even if he is correct it would take
some five years to achieve the sales and therefore funding to the sum of £7.6 million is not
immediately available.
[234] I conclude the enabling development is unlikely to produce the first tranche of
money necessary to carry forward the development, namely: the £7.6 million.
[235] Moreover, there is a further significant problem in respect of funding which is this:
on the evidence of the pursuer’s own quantity surveyor a minimum of at least £9 million is
necessary for the proposed development. Thus approximately an extra £1.4 million is
Page 72 ⇓
72
required over the sum that would be obtained from the section 76 agreement, should that
even be achievable.
[236] Further this figure of £9 million does not take account of certain material costs which
are undoubtedly necessary to put any hotel built within Ury House into the position upon
which the pursuer bases its valuation, namely: as a successful going concern. The costs of
providing these necessary elements for the hotel, which it is accepted at all hands have not
been costed by the pursuer will, on any view of the evidence led, add a very significant
figure onto that base sum of £9 million.
[237] Thus on the evidence the pursuer’s averment that the £7.6 million from the enabling
development is sufficient to finance the proposed development and that no borrowing will
be required is clearly not established. It was suggested by Mr MacColl in the course of
submissions that in cross-examination Mr Milne’s position had been that external funding
would only be required if costs went beyond £14 million. It was specifically challenged by
Mr Dunlop that any such evidence had been given. Accordingly I have considered
Mr Milne’s statements and my own notes of his evidence and I can find no such evidence.
In particular when Mr Milne dealt with funding in his statement and supplementary
statement at respectively paragraphs 28 and 2 his position is that the £7.6 million will
provide the funding and there is no reference to £14 million being available. When
specifically asked in cross-examination as to how he would finance costs beyond
£7.6 million he said he would borrow funds. I am satisfied that on the evidence the pursuer
would have to borrow if costs went beyond £7.6 million. If it were to be said that any
further money could be raised from the sale of the section 75 properties beyond the ring
fenced sum of £7.6 million that is subject to the same difficulties I have already referred to.
Page 73 ⇓
73
[238] The question is therefore where, according to the pursuer, the necessary funding is to
be obtained.
[239] In his evidence Mr Milne asserted that, if more than £7.6 million was needed then the
pursuer would need finance. His position was that he thought he could borrow money for
the proposed development although he also said that he was not presently looking for
funding. He did not elaborate as to how this borrowing was to be obtained; the amount of
the borrowing to be obtained; when it was to be obtained or the terms on which it was to be
obtained. No independent expert evidence was led on behalf of the pursuer which
supported Mr Milne’s position that such borrowing could be made available. Looking to the
evidence of Mr Milne on this issue I do not believe that it was reliable. It seemed to amount
to little more than a pious hope. I gained the impression that no particular thought had been
put into this issue by Mr Milne. Thus looking to the evidence led on behalf of the pursuer I
believe that there is no acceptable evidence that this development can be funded. It is in my
view an extraordinary gap in the pursuer’s evidence that nothing was produced by way of
expert evidence as to how this clear funding gap, which on any view was of a significant
amount, could be bridged.
[240] In order to seek to fill this gap in the evidence the pursuer to some extent sought to
place reliance on the evidence of the defender’s expert on this issue, namely
Mr Clark-Hutchison. This appeared to me a somewhat odd position given that in
submissions I was asked by Mr MacColl to reject his evidence as he had not in his evidence
presented a full and impartial picture.
[241] I am not persuaded by Mr MacColl’s argument that I should entirely put to one side
the evidence of this witness. I do not agree with the submission that Mr Clark-Hutchison’s
evidence was that he had provided the defender with a further written report which was
Page 74 ⇓
74
significantly more favourable to the position of the pursuer and which had not been
disclosed to the court.
[242] Looking to the whole of Mr Clark-Hutchison’s evidence when this issue was put to
him in the course of cross-examination I understood his position to be as follows: he
referred to a later brief report in which he had commented that the enabling development
(upon which he did not comment in his primary report which was produced to the court as,
at the time of preparation he was unaware of it) was a positive in respect to the pursuer’s
funding position, however, critically in order for it to be of significance in respect to the
issue of funding it was necessary for that sum to be in the bank, (ie, as I understood it the
houses had been sold and the £7.6 million was available to the pursuer), before it could be
used when seeking funding from other lenders. This did not seem to me to be a significantly
more favourable position to the pursuer than that expressed in the original report. What
was being said it appeared to me was that if that £7.6 million funding had been raised
through the sale of the houses then yes that would have been a positive point which would
have required to have been considered when looking at the pursuer obtaining funding.
However, it has never been the case that the £7.6 million is in the bank, the vast
preponderance of it has not been raised. Thus this further report is not in any real sense
favourable to the pursuer’s position. I am unaware as to why this brief report was not
lodged. However, what I am clear about is that I did not gain the impression that the
witness was seeking to hide anything by it not having been lodged. Rather I gained the
impression that this witness was entirely honest and that he was at all times fully aware of
the duties which he owed to the court and that he properly fulfilled these. He produced a
fully reasoned report and I thought his evidence both credible and reliable. There was no
positive expert evidence put forward on behalf of the pursuer which countered his position.
Page 75 ⇓
75
I could see no reason why I should not accept this evidence subject to accepting the evidence
of the defender’s other experts who produced figures which he used in his opinion and
which I will comment upon later.
[243] Turning to the substance of his report Mr Clark-Hutchison accepted that his opinion
that a lender would decline to advance any debt facility in respect to the proposed
development was based on the various figures provided to him by the defender’s experts
and if these were wrong his opinion might have to be altered. However, I did not
understand him at any point in his evidence to accept that on the basis of any particular
figures produced on behalf of the pursuer that they would cause him to alter his
fundamental opinion as to whether lending could be obtained. Beyond that, looking to the
various figures which he produced and the various criteria which he applied in his report,
they do not seem to support an argument that on the basis of any view of the various
relevant figures I was prepared to accept that a lending body would lend a sufficient sum to
fund this project.
[244] I conclude for the above reasons that the pursuer is not in a position to fund the
proposed project and therefore for this further reason its case must fail.
[245] Moving on, the next issue which arose sharply between the parties was whether any
benefits arising from the existence of the pipeline should be had regard to in respect of the
calculation of losses for which compensation should be awarded in terms of the condition.
Secondly, if the answer to that question is yes there was an issue between the parties as to
whether any such benefits had as a matter of fact and law accrued and the extent of these.
[246] As to the first question this turns on a proper construction of condition 25 and the
critical wording in this context is: “pay compensation for all losses arising from their
decision not to divert the pipeline”.
Page 76 ⇓
76
[247] If the decision not to divert prevents the pursuer from proceeding with one
development but nevertheless as a direct consequence allows another development to
proceed, which could not otherwise have proceeded, then I am persuaded on a sound
construction that requires to be had regard to in the calculation of loss arising from the
decision.
[248] On an ordinary and natural reading of the word loss it means the diminution
resulting from the said decision. If the said decision has therefore also produced a benefit
that has to be taken account of in calculating if there is in fact any loss and the amount
thereof. Or put another way, no loss arises from the decision if benefits directly resulting
from that decision outweigh the negative effects of the decision.
[249] Not to approach the assessment of loss in the manner described would I think be to
construe loss in such a way that it loses its essential meaning.
[250] Equally the ordinary and natural meaning of the word “compensation” namely: the
counterbalancing of a deficiency tends to support the view that what is to be calculated is
the global position having regard to both the negative and positive effects of the decision not
to move the pipeline.
[251] To apply the construction contended for by the pursuer would not compensate the
pursuer but grant the pursuer a windfall. It would be granted a windfall in that it would be
compensated for the entire negative effects of the decision not to move the pipeline but no
regard would be to the positive effects of the same decision. I am clearly of the view that the
wording of the condition cannot be read so as to produce a result which provides a windfall
of this nature for the pursuer.
[252] I consider that the principle enunciated by Lord Blackburn in respect to damages to
which I was referred by Mr Dunlop can with due respect to the ordinary and natural
Page 77 ⇓
77
meaning of the language in condition 25 be read across as applying to the said condition. I
believe support for that position can be found at paragraph 16 in the observations in the
Arnold White Estates Ltd v National Grid Electricity Transmission Plc to which I was referred by
Mr Dunlop.
[253] Having expressed my view as to the sound construction of the condition and
therefore what I believe the proper approach in respect to the assessment of loss; namely
having regard to accruals as well as losses resulting from the decision, I turn to consider
whether any such benefits have accrued.
[254] First I consider it is reasonably clear that planning permission for the walled garden
development would not have been granted but for the existence of the pipeline and the
decision not to move it.
[255] In considering this issue the appropriate starting point is a letter from Mr Milne to
Mr Mair at page 1025 of the joint bundle dated 12 December 2018 where he says this:
“A major unseen constraint on the development proposals for the main building has
been the proximity of the BP Forties pipeline that crosses within 30m of the building.
This has meant that the main building can only accommodate a limited amount of
bedrooms. …
The proximity to the pipeline has meant the bedrooms in the main building are not
sufficient and as you know we have been greatly restricted in developing this part of
the main building. The hotel annex which is approved for 120 rooms is too far away
from the main building to operate as a five-star luxury resort experience.
After much deliberation the only possible location for the additional hotel rooms was
in the walled garden, this location meant rooms could be hidden behind the existing
walls and the garden could be reused for supply of produce for the hotel kitchen.”
[256] It is quite clear from the terms of the said letter that Mr Milne is using as a
justification for obtaining planning permission for the walled garden the existence of the
pipeline and its limitations on the use of Ury House.
Page 78 ⇓
78
[257] There is then the report of handling of AC relative to the application regarding the
walled garden.
[258] It is clear from the document as a whole but in particular having regard to the terms
of pages 1258, 1259, 1263, 1264 and 1272 in the joint bundle that the justification for the
granting of the planning permission is the existence of the pipeline and the effect this has
had on the number of bedrooms which could be built within Ury House. In particular I note
these comments first at page 1259 in the joint bundle under the heading “Supporting
Information”:
“Limitations on the use of Ury House as a hotel from the Forties pipeline have been
known for some time and were fully explored in the recent APP/2017/0241 which
saw a proposal for 32 bedrooms within Ury House refused due to the health and
safety risk from having so many overnight guests in close proximity to the pipeline.
The inability to provide the hotel rooms in Ury House, where the space does exist,
has led to exploration of alternatives and this final proposal coming forward to
provide the required rooms to make the hotel use at Ury House viable.”
[259] Secondly at page 1264 in the joint bundle this is said:
“The need for the hotel rooms is accepted, and has been long established in previous
consents for the wider resort development at Ury Estate. The location of the rooms
within the walled garden has been justified through outlining alternative sites in
close proximity to Ury House as being restricted by the pipeline, proposed golf
course, topography and prominence. The tourist accommodation is compliant with
policy B3 of the LDP, and will enhance the previously consented proposals at Ury
House.”
[260] The above passages appear to me to be an explicit acceptance that in the absence of
the pipeline there would not be a justification for the walled garden proposal.
[261] I would also refer to the area committee report of AC at page 2498 of the joint bundle
at paragraph 6.3 which is to the same effect.
[262] Moreover, Mr Milne in the course of giving evidence accepted that:
“The walled garden [was] an alternative way to get 35 bedrooms.”
Page 79 ⇓
79
And when asked whether: “[the] difficulty in getting 35 rooms in Ury House assisted him in
getting planning permission for the walled garden” he answered: “I think so”.
[263] Mr Milne put forward the same position in his witness statement at paragraphs 35
and 36.
[264] I am persuaded by the above evidence that the walled garden development planning
permission resulted from and would not have been granted but for the existence of the
pipeline and the position regarding the use of Ury House as only a 5 and not 35 bedroom
hotel which was the perceived consequence of the decision not to move the pipeline. The
granting of the walled garden planning permission is thus dependent upon or looked at in
another way conditional upon the refused application and thus the existence of the pipeline.
Mr MacColl made the point that Mr Mair was not asked about this matter by Mr Dunlop.
However, that does not diminish the effect of the above evidence which I believe leads
clearly and directly to the conclusion I have arrived at.
[265] Two difficulties for the pursuer’s case flow from the above.
[266] On record the pursuer avers as follows:
“the walled garden development … is a separate and supplementary development to
the proposed hotel development of Ury House. It is not a substitute for the
35 bedroom development at Ury House which is precluded by the pipeline” (see the
end of article 5 of condescendence).
[267] The pursuer has not proved this averment. On the contrary on the evidence it has
clearly been established that this is not a supplementary development but an alternative
development allowed only because of the existence of the pipeline and which would not
otherwise have been allowed. Beyond that and critically in reference to the issue of loss, the
pursuer, as argued by Mr Dunlop, has failed to establish that there is a difference between
the ultimate value of the walled garden development as compared to the value of the
Page 80 ⇓
80
proposed development of a 35 bedroom hotel within Ury House and has not shown what is
the difference.
[268] The failure to prove that there is a loss and if such a loss does exist the extent of that
loss must again be fatal to the pursuer’s claim.
[269] It was in addition contended by Mr Dunlop that the permission granted to build the
230 houses and the golf course were so interlinked to the existence of the pipeline that they
equally could be regarded as accruals and required to be taken into account in respect to the
existence of any loss which required to be compensated. This argument was not however
developed in any meaningful way by Mr Dunlop. I am not persuaded that these two
permissions fall into the same category as the walled garden permission, namely, that they
were only granted because of the existence of the pipeline and the decision not to move it.
[270] The next issue to be considered is what is to be assessed?
[271] In arriving at a sound construction the whole terms of the clause have to be had
regard to. Looking at the whole terms of the clause the purpose of it is to compensate the
pursuer for all losses which flowed from the failure to obtain planning permission due to the
refusal to move the pipeline. What flowed from that decision in the present case is an
inability to take forward a proposal to develop Ury House as a luxury five-star 35 bedroom
hotel. What, it appears to me, the pursuer has not lost is the value of such a hotel which is
up and running and operating successfully. The pursuer has not sustained such a loss.
[272] The approach to the issue of loss adopted by the pursuer is to look into the future
and say: a definite result will be produced, namely a 35 bedroom hotel at a five-star luxury
level which is successful. I believe that cannot on a sound construction of the clause be a
proper approach.
Page 81 ⇓
81
[273] Such an approach to assessment of loss is not appropriate as it has no regard to the
risks that a fully operating five-star luxury hotel will not be achieved or that the hotel will
not operate at the appropriate level.
[274] Having regard to the whole wording of the condition and its context this cannot be a
sound approach to the assessment of loss. That it is not the correct approach to assessment
of loss is confirmed by considering the following situation: planning permission is refused
on the basis of the existence of the pipeline for some proposed development which has no
real prospect of being carried out to fruition and if carried forward has no real prospects of
success. A valuation is thereafter obtained on the assumptions that the project will be
carried forward and will be successful. In those circumstances it cannot be correct to assess
loss on the basis of that valuation. Equally, in the much less extreme circumstances of the
present case, it cannot be correct to approach the matter without having regard to the issue
of risk which I have identified.
[275] It appears to me for the reasons advanced by Mr Dunlop that the approach to
valuation adopted by the defender reflects the wording of the clause. Beyond that it fits in
with the usual method of assessing compensation which builds in the risk that certain things
may or may not happen. Thus as contended by Mr Dunlop it avoids over or under
compensation by looking to present actuality and not future contingency and means that the
court will not commit the error of attempting to award “compensation” for consequences
which are too remote. It ensures, as parties surely, looked at objectively, must have
intended that the defender should not require to pay as compensation a larger amount than
the owner could reasonably have obtained for his land in the open market in the absence of
the pipeline.
Page 82 ⇓
82
[276] I consider Mr Dunlop is correct in advancing the argument that there are two
possible constructions of the clause and that the defender’s conventional approach in using
loss of development value is the sound construction in that it fits with the wording of the
condition. It is difficult to see a tenable argument that the use of a measure of loss expressly
referred to in the condition is an unsound approach.
[277] In holding as above I am not saying that the sole measure of loss that can be had
regard to is loss of development value. The foregoing would clearly not be a sound
construction of condition 25. It would mean that the words “all losses including but without
prejudice to the said generality” would be rendered devoid of any meaning. Rather, I am
saying that the basis of assessment of loss relied upon by the pursuer is not one which on a
sound construction is available to it.
[278] An example of an approach other than loss of development value which may have
been open to the pursuer, on a proper reading of the condition, would have been to assess
its loss on the basis of a loss of a chance. Such an approach would I believe fall within the
terms of the clause and would take account of the type of risks to which I have made
mention and thus be an appropriate form of assessment of loss. The pursuer sought in its
submissions as a fall-back position to adopt this approach to assessment of loss and I will
consider these submissions later.
[279] On the other hand the form of assessment put forward by the defender clearly falls
within the definition of loss which can be compensated in terms of condition 25 in that it is
the single form of loss which is specified. When one considers the definition of development
value as set out by Mr Dunlop, it makes it even more unlikely that the approach of the
pursuer is one which falls within condition 25 for the reasons advanced by Mr Dunlop.
Page 83 ⇓
83
[280] Accordingly having held that the pursuer’s approach to the assessment of loss is not
an appropriate one having regard to the terms of condition 25 and having held that the
assessment of loss advanced by the defender is an appropriate one, this presents insuperable
difficulties for the pursuer. Given my above decision there is no proper assessment of loss
presented by the pursuer. Beyond that there is no countervailing evidence to that given by
Mr Chess on behalf of the defender that there has been no loss of development value.
[281] I found Mr Chess to be an impressive witness who had prepared a careful and fully
reasoned report. In his report there was a single mistake, which he quickly corrected at the
outset of his evidence. That single mistake did not cause me to reject the analysis of the
question of development value presented by him. Equally he conceded that he had a
difficulty dealing with the section 75 sum of £7.6 million. He explained the nature of this
difficulty and this explanation seemed reasonable. His position regarding this did not cause
me to reject his evidence. Lastly there was a criticism that certain elements of the report had
been prepared by a colleague who did not give evidence. As I understood his evidence
Mr Chess had checked this preparatory work and was in a position to speak to it. I do not
think that this argument in any way undermines his evidence. I had no difficulty in
accepting his evidence and therefore in holding that there was no development value. This
conclusion is also fatal to the pursuer’s case.
[282] Further it seems to me clear that the valuation of any loss occurring to the pursuer
has to start from a consideration of the cost of the proposed development.
[283] It was suggested by Mr Dunlop that it was an oddity of this case that the pursuer,
upon whom the onus lies to establish loss and its level, has not put before the court a
calculation of what the cost would be to put in place a successful operating hotel which is
what it contends should be valued. The evidence presented by the pursuer in this context
Page 84 ⇓
84
came solely from Mr Moir and he accepted that he had not put forward any costing in
relation to the following material elements in the putting together of such a hotel: he has
only costed the development to a point at which the shell of the building was completed,
but, crucially, (a) not yet with a spa or conference facility which the pursuer has had valued;
(b) not yet with any connection, in the form of sewers, or water, or electricity, or gas or
telecommunications, or roads, to the outside world; (c) not yet with a garden of any sort;
and (d) not yet with any of the fixtures, fittings of equipment that would be necessary to
operate a luxury hotel.
[284] On the other hand the expert witness for the defender, Mr Robinson gave evidence of
costing and in particular costed the various elements not commented upon by Mr Moir. I
have already observed that I do not accept Mr MacColl’s submissions that all or at least a
very large part Mr Robinson’s evidence should be rejected.
[285] Generally I thought both Mr Robinson and Mr Moir were reasonably impressive
witnesses who at all times sought to be of assistance to the court. In respect to the elements
of the costings where they both commented and they disagreed I believe first it would be
appropriate to prefer the real world figures for work done to date rather than the worked up
cost figures advanced by Mr Robinson. As regards to the other elements on which they both
commented and disagreed, these disagreements seemed to be the types of disagreement
likely to be found between two experts commenting on figures of this type. There appeared
to be no clearly identifiable reason why I should prefer one figure over the other. Both
witnesses appear to have approached the matter in a reasonable fashion and there was no
real disagreement about the basis upon which they had approached the matter. It seemed to
me against that background that the adoption of a figure halfway between the figures
Page 85 ⇓
85
provided by each witness would most accurately reflect the best estimate for the cost and I
have adopted this approach.
[286] In relation to the elements costed by Mr Robinson but not by Mr Moir as earlier
identified I consider that the basis upon which Mr Robinson has carried out the valuation is
a reasonable one for the reasons which I have referred to earlier when considering whether
his evidence should as a whole be rejected. I also observe that in respect to these figures
there is no real contrary evidence.
[287] However, although in general his evidence on this appeared sound I believe his final
figure for these elements should be reduced on a broad axe approach by 20% to allow for the
following: (a) he accepted that the hypothetical owner might decide later in the building
process to leave out certain items he had costed or to choose a slightly cheaper alternative
(b) there was to some extent some double counting identified and (c) the factor referred to
by Mr Dunlop relative to the spa.
[288] The above matters, however, do not detract from the soundness of his overall
approach and the broad reliability of the figures he arrived at for these elements. I do not
accept Mr MacColl’s position that there should be a reduction of the extent to which he
submitted.
[289] On a consideration of the whole evidence what cannot on any basis be disputed is
that the irreducible minimum build cost is £8,992,779, which is a figure contained in
Mr Robinson’s report at page 2327 of the witness statements joint bundle to which I
understand Mr Moir in cross-examination assented to. This figure does not take account of
the excluded items which I have earlier identified. In the course of cross-examination
Mr Moir was taken through Mr Robinson’s report and in particular all of Mr Robinson’s
costings for excluded items. At the end of cross-examination he accepted a total cost figure
Page 86 ⇓
86
inclusive of the excluded items of £12.3 million. Mr MacColl submitted that had not been
Mr Moir’s positon in evidence. However, on looking at his evidence he did appear to assent
to this figure towards the end of his cross-examination. It is clear on the basis of these
figures alone that even applying the special assumptions and using the pursuer’s valuation
of the property there is no loss. The position is even more stark when Mr Chess’s figures are
had regard to when taken with the higher figure based on my view of Mr Robinson’s
evidence. This I believe is a further basis upon which the pursuer’s case fails.
[290] Turning to the fall-back position of the pursuer who founded on loss of a chance: it
is contended that the court should take a figure of 80% of its primary proposed figure as an
appropriate figure for loss of chance.
[291] Before considering that point in detail I observe that there is no reference in the
pleadings to such a fall-back position. Even allowing for this being a commercial action the
pursuer has to give proper notice in its pleadings of a particular position which it intends to
put forward in support of its case; here there is none. Therefore I do not think it
appropriate to have regard to these submissions given that there are no averments on which
they can be put forward.
[292] Assuming I am wrong in my above view, I do not think given the views which I have
expressed in respect of the other issues regarding loss that any figure to compensate for a
loss of a chance is justified. Even if I am wrong in that view I am not persuaded that an 80%
figure comes anywhere near reflecting the level of risk that this hotel would be built and
then operated successfully as a five star luxury hotel. I find it impossible on the evidence
and in particular having regard to the various factors that I have referred to when
considering the issues of buildability, fundability and viability to give a figure even on a
broad axe approach which would in any way approach the figure contended for by
Page 87 ⇓
87
Mr MacColl. Further, I do not believe there is sufficient acceptable evidence before me to
give any figure for the loss of a chance, particularly having regard to the various difficulties
regarding the evidence to which I have already referred. Accordingly even were I with the
pursuer on the substantive merits I would not make an award on the foregoing alternative
basis.
[293] Lastly, the defender relied on the terms of part (f) of condition 25. I do not believe on
the evidence that the argument advanced under this head and developed by Mr Dunlop was
correct. His position was that the planning permission would have been refused in any
event as it was not in proper form; not accompanied by the proper documentation; and due
to the difficulties with the plans to which I have referred. On looking to the evidence of
Mr Mair that position is not made out. On his evidence the only basis for refusal was the
existence of the pipeline and no other. I had no difficulty in accepting his evidence on this
matter and it provides a complete answer to Mr Dunlop’s argument.
Conclusion
[294] For the foregoing reasons the pursuer’s case in terms of the first conclusion fails.
The pursuer’s secondary case
[295] Beyond the above the pursuer also sought a declarator in the following terms:
“For declarator that the first defender is liable to make payment to the pursuers of all
professional charges reasonably incurred by the pursuer in connection with the claim
for compensation which he has made against the first defender under and in terms of
the Grant of Servitude recorded in the General Register of Sasines for the County of
Kincardine on 26 August 1977, and whether arising both before or after the
commencement of the present court action”
Page 88 ⇓
88
The pursuer’s position in respect to this was a short one and was this: the pursuer has a
clear entitlement to payment of professional fees reasonably incurred in relation to its
compensation claim. The defender has refused to acknowledge this throughout the present
dispute. As such declarator should be pronounced as second concluded for.
[296] Mr Dunlop argued as follows in his written submission:
“Finally, the defenders note the terms of the second conclusion, which seeks
declarator that the defenders are liable to make certain payments to the pursuers.
That conclusion is inept, and should be rejected as entirely inappropriate. The
remedy open to a party who claims that someone else is liable to make payment to
him is to sue for payment, not to sue for declarator. Nothing to which the declarator
might attach has been put before the court, and a bare declarator to the effect
contended for would be of no moment or effect whatsoever. If there are costs that
have been incurred thus far, they should have been claimed in the action and
established at proof. If there are costs that will be incurred in the future, then they
will have to be the subject matter of their own action, if competent. The pursuers
cannot decline to prove what has been or will be spent, and rest merely on a bare
declarator. That runs counter to ‘the well recognised stand taken by the Court that,
except in certain unusual circumstances, they do not entertain a bare declarator with
no executive conclusions appended: and that especially where the declarator which
alone the Lord Ordinary is to be asked to pronounce is (a) hypothetical, and (b) to be
pronounced ab ante’.”
This part of the action fails for the same reasons as the principal part of the action. In any
event I believe that Mr Dunlop is correct for the reasons he advances and for this further
reason I would not have granted the declarator.
Disposal
[297] For all of the above reasons I assoilzie the defender from the first and second
conclusions of the submissions. I have reserved the position in respect of expenses upon
which I was not addressed.